Why Some Lower-Cost Health Plans May Be a Bad Deal

Loosening the rules for short-term health plans may lead to higher premiums for many people — and cause high-stakes confusion for others.

Americans want health insurance that costs less. But many physician groups, insurers and consumer advocates fear loosening the rules for one type of lower-cost health plan would actually lead to higher premiums for many people — and cause high-stakes confusion for others.

The Trump administration is pursuing several strategies meant to promote consumer choice and reduce costs for health insurance. One would expand the availability of insurance intended to help people bridge gaps in coverage. It’s called short-term, limited duration coverage. Currently, these plans are available for a maximum of three months.

In February this year, the federal government proposed extending the duration cap to 364 days, making the plans appealing to many consumers as a lower-cost alternative to comprehensive coverage.

However, the reason short-term plans have lower premiums is that they’re exempt from requirements that comprehensive plans have to follow, including coverage of pre-existing conditions and benefits such as maternity care and prescription drugs.

Kurt Kossen, president of retail markets for Blue Cross and Blue Shield Plans in Illinois, Montana, New Mexico, Oklahoma and Texas, warns that extending the duration of short-term coverage would have unintended consequences.

The proposed changes, Kossen wrote in a comment letter to the Centers for Medicare and Medicaid Services, “would create a shadow market for individuals that would operate under a different set of rules, undercutting existing consumer protections and selectively insuring only the healthiest applicants.”

Kurt Kossen, President, Retail Markets Division, Blue Cross and Blue Shield Plans in Illinois, Montana, Oklahoma, New Mexico and Texas

Kurt Kossen, President, Retail Markets Division, Blue Cross and Blue Shield Plans in Illinois, Montana, Oklahoma, New Mexico and Texas

Providing affordable comprehensive coverage relies on balancing the costs across people with high and low health care needs. Anyone with a medical condition — such as high blood pressure, diabetes or pregnancy — may be turned down for a short-term policy.

“While the rule would increase the availability of lower premium products for the healthiest,” Kossen wrote, “it would have the effect of concentrating health care costs in the existing individual market and making coverage less affordable for those with pre-existing conditions.”

Coverage lacking

The Kaiser Family Foundation recently published an analysis of 24 short-term plans marketed in 45 states through two national online brokerages. Many had significant gaps in benefits:

  • 43 percent lacked coverage for behavioral health services
  • 62 percent didn’t cover substance-abuse treatment
  • 71 percent didn’t cover outpatient prescription drugs
  • None covered maternity care

The short-term plans that did include these benefits, the report found, had significant limits and exclusions that would not be allowed in plans that comply with the Affordable Care Act’s rules for comprehensive coverage.

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Short-term plans may also impose annual or lifetime dollar caps on coverage — also not allowed in ACA-compliant plans.

Physician and patient concerns

Doctor groups, including the American Academy of Family Physicians, say these slimmed down benefits may put their patients’ health at risk.

This is particularly problematic for people who have chronic or life-threatening conditions.

In a letter to U.S. Department of Health and Human Services, the AAFP said the proposal for short-term plans would allow “low-value insurance policies that could subject patients to catastrophic medical bills and medical bankruptcy. … This is particularly problematic for people who have chronic or life-threatening conditions that require costly treatment, close monitoring and ongoing medication.”

The American Cancer Society Cancer Action Network, the American Heart Association and 15 other patient and consumer groups, meanwhile, issued a joint statement opposing the proposed changes.

The formal comment period for the proposed regulations closed April 23. CMS may issue a final rule this summer or fall.

Other groups expressing concerns in comment letters include the American Hospital Association, Blue Cross Blue Shield Association and America’s Health Insurance Plans, the largest trade group for U.S. health insurers.

“We recommend that short-term plans should not be offered as a full replacement for comprehensive coverage,” AHIP Chief Operating Officer and incoming CEO Matthew Eyles said in the group’s letter.

Consumers enrolling in these plans should receive a “clear statement that a short-term plan is not comprehensive individual market health insurance,” Eyles wrote.

That notice to consumers should clearly explain whether the plan has annual or lifetime benefit limits and whether it covers treatment for pre-existing conditions, preventive care, prescription drugs and mental health care, Eyles wrote. “Americans expect health insurance to cover certain health services such as doctor’s appointments, urgent care and prescriptions even if the care is for a condition they had before they got the insurance.”

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