A report by private health insurance exchange eHealth shows more consumers are choosing short-term health insurance plans even though they don’t meet the requirements of the Affordable Care Act (ACA). Data released by the company shows that for many consumers, these plans come with a much smaller premium cost over major medical coverage.
During the first half of Open Enrollment for 2018, 56 percent of eHealth customers opted for short-term coverage, and 44 percent selected plans without government subsidies.
What Consumers Want
The report supports assertions that consumers want greater choice in healthcare options while maintaining lower costs. Critics have been opposed to the government’s requirement for major medical coverage for everyone including young and healthy individuals due to the fact that it raises their premiums unnecessarily.
“The demand for alternative non-ACA plans is growing, driven by sustained premium spikes for Obamacare major medical coverage. The removal of the individual mandate at the end of this year and importantly the extension of the maximum allowed duration for short-term plans in many states,” eHealth CEO Scott Flanders told investors. “As a result, we expect to see more consumers come into the market and use these alternative plans as a more affordable substitute for major medical coverage.”
Short-term health insurance plans allows consumers to customize their policies to their specific needs and can come with a much lower monthly premium. Because insurers are able to offer different policies and benefits, there are more options to offer coverage than through the government’s marketplace exchange.
Background
The provision of the ACA known as the “individual mandate” was recently repealed for 2019. This portion of the healthcare legislation requires taxpayers purchase qualifying coverage or face penalties.
After several false starts to revise “Obamacare” as the law is popularly known, Congress managed to enact the Tax Cut and Jobs Act. While this wasn’t a full reform of the ACA and had little to do with healthcare, it did repeal the most unpopular portion of the law, which was the individual mandate.
For those who are unable to qualify for federal financial assistance, short-term health plans are often less expensive. The rising costs of premiums have been the chief complaint of those getting coverage through the government marketplace exchanges.
According to another report by eHealth, from 2016 to 2017, average monthly premiums increased 18 percent for individuals with coverage through the exchange. For the period when the major provisions of the ACA took effect in 2014 to 2017, premiums increased a whopping 39 percent.
Even with government subsidies, many consumers in some states were priced out of the exchanges due to skyrocketing premiums. Marketplace customers in Arizona saw their premiums increase a staggering 116 percent in 2017 alone.
Be Careful When Comparing
The premiums aren’t the same because benefits differ between a major medical policy and a short-term one. Many consumers may not be fully aware of the differences.
An ACA policy is often more robust. Under short-term coverage, insurers can reject enrollees if they have a preexisting condition such as diabetes, asthma, or high blood pressure, among other ailments. In addition, some services covered under major medical healthcare aren’t covered by temporary plans. Each plan can have much different benefits.
Experts warn that these policies could potentially harm consumers who don’t realize that some benefits aren’t offered or essential health conditions aren’t covered such as prescription drug coverage or maternity care. Supporters of the government program worry that these plans draw people away from the public marketplace, leaving only the sickest and least desirable customers in the risk pool, further driving up premiums.
Trend Expected to Continue
With the easing of restrictions and removal of the penalty, more customers are expected to look for alternatives to major medical coverage. Additionally, many of these plans have been extended from less than 90 days to a year, and some may be renewed up to three years.
“We also expect to see a significant increase in enrollment volume from our digital marketing efforts,” Flanders said. “In the under-65 business we continue to successfully shift our focus to selling short-term plans and non-ACA insurance packages at more attractive price points to meet our customer needs.”
Flanders predicts “an avalanche” of interest in short-term options in 2019 thanks to Trump administration rule changes.
“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,” he told investors in October.
Americans will be able to benefit from the greater variety of short-term health plans available as well as the reduced hits on their wallets.
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