More eHealth customers choosing short-term insurance plans

Customers who buy plans on private health insurance exchange eHealth are taking advantage of their newfound ability to purchase an extended short-term insurance policy without triggering the individual mandate penalty, newly released data from the company shows.

Many more eHealth customers opted for short-term plans over unsubsidized Affordable Care Act-compliant plans during the first half of the ACA open enrollment period for 2019 coverage than during the previous open enrollment, eHealth said.

Among eHealth customers buying short-term plans and ACA plans without subsidies, seven in 10 enrolled in a short-term insurance plan between Nov. 1 and Nov. 25, while 30% opted to buy an ACA plan at full cost. During the first half of open enrollment for 2018 coverage, 56% of chose a short-term insurance plan, while 44% enrolled in an unsubsidized ACA plan.

The company had about 25,000 members in short-term plans at the end of the third-quarter, up 15% from a year ago, it told investors in October.

For people who don't qualify for federal financial help, short-term plans are less expensive than more robust ACA plans, though they don't have to cover people with pre-existing conditions and often don't cover certain essential health benefits, such as prescription drugs or maternity care. Some experts have warned that these "skinny" plans could harm consumers who don't understand the limitations of the coverage they are buying. Critics also fear the plans will siphon healthy people away from the individual market, causing premiums to spike for those who remain.

Beyond the cheaper price tag, the Trump administration's decision to zero-out the financial penalty for not purchasing health insurance coverage starting in 2019 is likely drawing more customers to the short-term policies. In the past, people who enrolled in short-term plans would have been subject to a fine because the ACA does not count the policies as satisfying its coverage requirement.

The Trump administration also made short-term policies more attractive to customers by allowing them to last up to 12 months, reversing an Obama-era rule that limited those policies to less than three months.

But eHealth has also made some marketing changes that could be contributing to the uptick. In April, eHealth CEO Scott Flanders told Modern Healthcare the company would begin promoting alternatives to ACA coverage, including short-term plans, rather than prioritize ACA-compliant plans, to reverse the decreasing market-share eHealth has experienced over the past few years.

Flanders anticipated "an avalanche" of interest in short-term plans in 2019 thanks to the Trump rule allowing insurers to offer longer lasting policies and the lack of the mandate penalty.

"While the major medical market remains challenged the short-term health insurance opportunity is attractive and allowed us to grow the total number of our approved members in the individual market over the same quarter last year for the second consecutive quarter," he told investors in October.

The average short-term plan premium among eHealth customers who enrolled in one was $107; those who enrolled in unsubsidized ACA plans faced an average individual premium of $477, according to the report. At the same time, people who enrolled in short-term plans faced an average deductible of $5,721—much higher than the average individual deductible for an ACA-compliant plan of $4,064.

Under the Trump rule, insurers can also allow consumers to renew their short-term plans for up to three years under the rule issued in August.

In an interview earlier this month, eHealth's senior director of carrier relations said most insurers the exchange works with have not included the option to auto-renewability in any plans currently available, but some insurers are considering new products to be launched at the beginning of 2019 that he expects to be auto-renewable.