HHS proposes clampdown on short-term health coverage

The Department of Health and Human Services (HHS) has announced steps aimed at limiting short-term health plans and strengthening the marketplaces. 

One step is the clampdown on short-term insurance policies that include features largely banned under the Affordable Care Act (ACA), according to the Wall Street Journal. Under the new rule, short-term coverage must be less than three months long and cannot be renewed at the end of that period. The proposal seeks to close a gap that has let healthier consumers purchase short-term plans that could last for nearly a year, sometimes using them as a cheaper substitute for ACA plans.

Reid

"Short term medical plans are generally purchased by consumers that are between jobs and do not have income but want something that covers an unforeseen health need, this truly is 'insurance' rather than pre-paid healthcare," says David A. Reid, founder and CEO, EaseCentral. “They are very affordable and fill an important need.  People are able to take out 'back-to-back' policies if the original period was not long enough. This is not a continuation of the original policy but a brand new policy taken out consecutively." 

HHS has spent time analyzing the data related to usage, as well as fraud, waste and abuse, which has been a significant challenge with the ACA and short-term plans, according to Adam Nelson, vice president of healthcare and life sciences at NTT DATA. "What HHS is attempting to do is define groupings of policy users and policy needs for those users, all while balancing the risk," he says.

Nelson

After one year, says Nelson, health plans review their ACA members and "bucket the policy holders—healthy, at-risk and chronic, how much they have paid out in claims for those groups, and which policies those groups are using, which translates into how much they are paying," he explains. 

Early results of sign-ups on the exchanges indicate that the risk-pool is older and less healthy than anticipated, resulting in carriers having to increase premiums greater than what the administration had anticipated, according to William Hoagland, senior vice president, Bipartisan Policy Center, and former U.S. Senate staff member.

"Mini-med plans, shorthand for policies that existed prior to the ACA, were targets for elimination," says Hoagland. "The initial regulations implementing the ACA's essentially eliminated these plans and came under pressure early on from employers who provided these mini-med policies to allow for a transition period before they were totally eliminated.

Hoagland

"These policies provided employers the opportunity to provide, particularly part-time, temporary workers, or those out-of-work, some basic healthcare insurance coverage," he continues. "Many of the beneficiaries of these plans were/are relatively young and healthy and only required some basic coverage for emergency care. By limiting mini-meds to just three months with no renewable, the administration hopes to increase sign-ups into the government run exchanges and thereby balance out the risk pool with healthier participants and lessen pressure on carriers to increase premiums."

Accommodation was provided during the phase-in of the ACA employer mandate to allow for such plans for a one-year coverage, according to Hoagland.

It is possible, he believes, that executives will be looking at an increase in the number of participants in managed care programs as the mini-meds fully phase out.

"But I do not see any immediate impact on managed care enrollment and indeed do not believe any impact will be felt for sometime," he says. "Potentially, some lessening of the pressure on premium increases in the future as the risk-pool improves. But the market for short-term policies is relatively small and largely unknown to the general public, so once again managed care providers should not expect significant impact from the proposed change in regulations."

Next: Blame game

According to Reid, however, health insurers will be the first blamed when people do not have health coverage. "While insurers are attempting to provide consumers with an affordable option to meet a temporary need, they are the ones likely to be blamed as people face financial ruin while between jobs and suffer from an unforeseen health need," says Reid.

Other proposed changes issued as a package with the mini-med proposals could have a bigger impact, says Hoagland, such as improving the risk adjustment program by incorporating prescription drug utilization data in determining enrollees' health status.

"This would thus improve the compensation to insurers with higher-risk enrollees and thus improve the sustainability of the program," he says.   

Tracking prescription drug use is a beneficial method to add to the knowledge of the member and the "need," according to Nelson.

"Here 'need' signifies a shift in thinking about the consumer, as in what is their need, be it long- or short-term policy? Consumers who lose a job and shift to a short-term plan or those with pre-existing conditions are 'at-risk,' which forces a contradiction. They need insurance, but denying it will not cause the member to find a new job and sign up for a long-term plan more quickly, but rather it actually pushes the member to engage with the insurer more to argue their point, share their concerns and frustration, and spend more of the insurers money through member engagement," Nelson says.

"Unfortunately, with the ACA if you are unemployed you may not qualify for subsidies due to income already earned during the year," says Reid. "This new rule is going to make it impossible for many to obtain coverage because they do not qualify for a subsidy, they have no income and now that the ACA has doubled traditional insurance costs it will be impossible for them to protect themselves.

"Rather than being able to responsibly and affordably cover unforeseen conditions, these people will be forced to go without coverage," Reid adds. "If they end up becoming ill or injured in an accident, their only option will be expensive care in the emergency room, possibly followed by a personal bankruptcy. When a person has no insurance, the emergency room is the only place care can be received. While a condition may not be an 'emergency room' need, it may require immediate attention. These types of ailments, such as an ear infection or UTI, will be treated at a cost nearly 10 times the rate it could otherwise be treated. When you use an emergency room for a non-emergency need you are place at the back of the line and forced to wait hours. Consumers tend to blame providers for these long waits."

Tracking relevant information, from prescription usage to claim data, and having access to clinical information could enable the insurers to develop more of a retail relationship with its members, whether enrolled in long- or short-term plans, according to Nelson.

"Care managers, counselors, care coordinators, all employed by insurers already, do have the ability to form a more knowledgeable relationship, lead to higher levels of satisfaction and increase the honest use of short-term plans," he says.

Next: Are you losing cash?

Executives end up losing money and in a detrimental shift, opting out of the ACA marketplace, or raising the premiums of plans to cover the loss, according to Nelson. "The effect is honest members pay more to cover the abuse. As HHS shifts, there are benefits as well as implications."

By limiting renewals, members who have not been able to secure gainful change to their life event would have to sign up for a long-term plan and pay higher premiums, while they are typically in a stressful period not earning, explains Nelson.

"By offering these policies, a mechanism exists to create an insurance fund for claims that occur during these temporary needs," says Reid. "By no longer being able to insure these losses, combined with the fact that a consumer will be unable to pay the medical bills, unpaid claims will be shifted to others, causing healthcare premiums in the traditional market to rise."

"This could lead to higher stress levels, more claims, and a longer duration to find new employment," Nelson says. "What a health plan gains in premiums, they might spend a portion of dealing with higher levels of customer education and enrollment, leading to lower customer satisfaction and membership."

Risk pool adjustment is a method used to balance the healthy and sick, read profitable and unprofitable, across all the insurers providing plans in the ACA marketplace, according to Nelson.

With the limitations, there could be an uptick in insurers getting back into the market, which might actually have the opposite effect of natural competition, Nelson says.

"The thought is with more insurers, the lower prices will go, yet with fraud and abuse plus at-risk and chronic consumers tending to choose the lowest price, those plans were hit hard, thus risk adjustment by HHS to balance which members were with which plan and the government re-allocating membership and premiums," he says. "However, as insurers exited the marketplace, those few remaining would naturally have higher membership levels of both healthy and not so much, and this increased membership of both types would also help dilute the loss caused by fraud, waste and abuse and chronic members having medical needs and claims reimbursement.

"The real objective of an insurer should shift from providing coverage to providing an experience, with targeted marketing and programs for all users: healthy, at-risk and chronic, whether they are in long- or short-term plans, and focusing on those on short-term to ensure they receive care and fairness of coverage, which will lead to higher levels of honesty and expedite the shift to a long-term plan when possible," Nelson says.