Trump's short-term insurance ploy could have long-term consequences
Holly Monger seems like an unlikely candidate for short-term health insurance, the type of just-in-case policy known for being cheap and skimpy.
She's self-employed, helping clients wade through mountains of medical bills to appeal on their behalf or to educate them about health insurance options. When it came to buying her own plan, the Obamacare public health insurance exchange was too expensive, Monger says. So last year she bought a short-term policy with a roughly $400 monthly premium, less than half the cost of a private plan she looked at. She'll pay the $695 federal tax penalty, too, since her plan doesn't meet the requirements of the Affordable Care Act; it doesn't cover preventive care, for example.
Monger, 62, is betting she'll remain relatively healthy, and saving a lot of money in the meantime. "To me, it's like catastrophic coverage," the Vernon Hills resident says.
Monger's experience offers a glimpse into the tiny market of short-term health plans, which was thrust into the spotlight last month after President Donald Trump signed an executive order directing federal agencies to consider reversing an Obama-era rule limiting enrollment in these stripped-down plans to less than three months.
Trump wants an alternative to Obamacare. He and other critics say full-fledged plans have become increasingly unaffordable for the roughly 17 percent of U.S. consumers who don't qualify for financial aid to buy a full-fledged plan.
But the president's move could cause damage. Short-term plans could lure healthy people looking for cheaper options and leave the sickest people on the ACA exchange, fueling price hikes and potentially the exit of insurers. Here's another possible domino effect: If, for instance, healthy people on short-term policies wind up in the emergency room, yet can't afford their deductibles, hospitals—already accumulating debt from patients with high-deductible health plans who aren't paying their medical bills—would get squeezed even more.
Short-term policies are meant to cover people who need a bridge. They're between jobs. They're seasonal workers. They missed open enrollment and need coverage before the next round.
"It's better than being uninsured," explains Waukegan broker Carrie Espinosa. Still, "I tell people, you're not buying this to go to the doctor."
Short-term policies don't typically cover pre-existing conditions. If you get diagnosed with cancer while on a short-term policy, but tests show you had it before your coverage started even though you were unaware of it, your insurer doesn't have to cover treatment. Since plans are sold only in short increments, deductibles start over every months or so.
It's not clear how many Illinoisans have short-term plans, though 10 insurers are approved to sell them. The state Insurance Department doesn't track enrollment, and federal regulators don't require insurers to report it. But nationwide, nearly 161,000 people were covered by short-term plans as of Dec. 31, according to the National Association of Insurance Commissioners, based in Kansas City, Mo. Insurers covering them collected $145.6 million in premiums but spent $98.1 million on claims.
The numbers have been climbing nationally since the ACA exchange debuted in 2013, providing a lifeline for lower-income Americans who by law needed to buy coverage, but delivering sticker shock to the middle class that signed up, too. That's when interest in short-term policies started to tick up, according to some Chicago-area brokers and insurers.
United Security, based in south suburban Bedford Park, sells plans in six states, including Illinois. The company has written about 1,000 short-term policies this year, half of them in Illinois. "A lot of the people that we are coming across, they have no coverage," says Bob Dial, vice president of operations. "They can't afford the Affordable Care Act rates." Policyholders include farmers, tradesmen and small-business owners with a few employees, but also young people who have aged out of their parents' health insurance coverage.
David Kettig, president of New York-based Independence Holding, sees it differently. Short-term plans are not alternatives to Obamacare, he says. The largest segment of his purchasers are 45 to 55 years old, and in 2016, the bulk of buyers were people looking to bridge a gap. Kettig believes Independence is among the largest sellers of short-term plans in the U.S., peddling policies in 42 states, including Illinois.
"Given the turmoil and the uncertainty around the ACA and the exchanges, the fact that the budget has been cut to promote them, these products are desperately needed now," Kettig says.
Illinois requires short-term plans to cover more than a dozen conditions, including emergency medical care in the case of a sexual assault and physical therapy for patients with multiple sclerosis. That's in line with regulations in other states, with one exception. Illinois also requires that partners in civil unions get coverage, too, says Jan Dubauskas, general counsel of the specialty health division at Independence.
In a statement, Jennifer Hammer, director of the Illinois Insurance Department, says she's concerned that the expansion of short-term plans, "if implemented too hastily, will result in consumers purchasing products that don't provide the consumer protection to which they are accustomed."
As for Monger? Her policy expires at the end of the month. She's shopping for a new plan.
"Trump's short-term insurance ploy could have long-term consequences" originally appeared in Crain's Chicago Business.
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