The affordability of healthcare promises to be the dominant consumer issue in the upcoming 2020 election.Â By large margins, polling shows affordability as the most important issue for Congress to address, and candidates from both parties are increasingly focused on this issue.Â While there are many dimensions to affordability, one primary aspect is ensuring that coverage is valuable and that insurance markets are working to serve the interests of consumers.
One class of health insurance policies appear to be failing this test.Â For decades, consumers have used short-term, or limited duration health plans to keep their insurance between jobs or during brief periods before they obtain more comprehensive coverage. Theyâ€™ve always been seen as a stop-gap measure for brief periodsâ€”meant to forestall any waiting period associated with employer-based coverage, and therefore never promised the benefits typical of year-long policies.
Yet, since August of last year, bolstered by favorable federal rulemaking, limited duration plans are being marketed to consumers as a promising way to access affordable coverage. That could turn out to be a big concern for all consumers.
Previously limited to a three-month duration, these plans are now available for any period less than 12 months and can be renewed for up to 36 months, making them look a lot like conventional health insurance options. The similarities end there.
Plans that are compliant with the Affordable Care Act (ACA) use income-based subsidies to promote affordability, while maintaining comprehensive coverage. Limited duration plans, which have been promoted by some in Congress as an alternative to Obamacare, do not use subsidies and offer far fewer medical benefits than ACA-compliant plans. This is because they are fully exempt from the ACAâ€™s requirement that plans sold on the federal or state marketplaces must spend 80 percent of their premiums on medical care and quality improvement.
The most recent National Association of Insurance Commissionersâ€™ report on limited duration plans found that most devote only half of their premium dollars to medical care. If they want, they are at liberty to spend even less.
Limited duration plans also lack many of the ACAâ€™s consumer protections, such as free preventive care; zero-dollar limits on coverage; and coverage for essential benefits, like emergency and mental health services. Limited duration plans also reintroduced medical underwriting in order to make coverage determinationsâ€”and outright coverage denials based on preexisting conditionsâ€”two historic barriers to access and affordability that the ACA eliminated.Â Currently, none provide maternity coverage and few provide substance abuse, mental health, or even basic prescription drug coverage.
Consumers who donâ€™t get their insurance coverage through work, or through Medicare or Medicaid, want and need to be able to purchase insurance on the individual market thatâ€™s affordable and provides value through robust coverage. But the recent makeover of limited duration health plans as an alternative to ACA-compliant policies might end up costing the people who purchase them a lot more.
The Trump Administrationâ€™s final rule on limited duration plans requires issuers to prominently give notice in their consumer materials, explaining the limits of the policy they are purchasing. However, early experience has shown that consumers donâ€™t always understandâ€”or are never told aboutâ€”the significant differences between limited duration plans and their ACA-compliant counterparts. Even when authority to regulate is clear, itâ€™s hard to police such policies given limited resources.
Researchers at Georgetown Universityâ€™s Health Policy Institute made this clear in a report published last month that uncovered deceptive marketing practices and substantial confusion around short-term plans. Of the 65 unique short-term plan websites the researchers examined, none directed consumers to healthcare.gov, and few provided any information about the benefits, cost sharing or premiums. State policymakers acknowledged that they lacked enough information about limited duration plans â€“ and possibly even the authority â€“ to regulate them.
Interestingly, insurance brokers may also be especially incented to push these plans over standard insurance.Â In standard ACA compliant insurance there is a Federal guarantee that 80 percent of the cost must be spent on healthcare.Â But there is no such guarantee on limited duration insurance, so the plans offering these products can pay the brokers more to sell them.
Seven organizations, including the Association for Community Affiliated Plans, American Psychiatric Association and two major mental health advocacy organizations, recently called for an end to limited duration health plans being marked and sold as comprehensive coverage, filing a lawsuit in the U.S. District Court for the District of Columbia.Â Some states â€“ notably Massachusetts, New Jersey, New York, and California â€“ have taken matters into their own hands and banned these products
If limited duration plansâ€™ skinny benefit offerings and lack of ACA consumer protections arenâ€™t enough to meet the medical and financial needs of the people purchasing them, they will ultimately end up paying more â€“ possibly much more â€“ in out of pocket expenses and jeopardizing their health. This calls into question whether these plans are truly affordable alternatives to ACA-compliant plans at all.
Itâ€™s not just the beneficiaries of limited duration health plans who will pay more â€“ itâ€™s also the millions of Americans who enrolled in ACA-compliant coverage precisely because of policymakersâ€™ promise of affordability. Encouraging those in the market for individual coverage to sign up for limited duration plans siphons potential enrollees away from the exchanges. With fewer people in the risk pool of ACA-compliant plans, premiums will rise.
New research from Wakely discussing the individual market this year supports this conclusion. Enrollment in ACA-compliant plans is expected to drop between approximately 2.7 percent to 6.4 percent, while premiums will rise between 0.7 percent to 1.7 percent. The impact is expected to be even larger once the market matures, with projected enrollment decreases ranging from approximately 8.2 percent to 15 percent and premium increases ranging from 2.2 percent to 6.6 percent.
After years of ideological debates about the best way to improve access to insurance through a greater focus on affordability, the time has come for a bipartisan solution to ensure that individual insurance is available to consumers at a reasonable cost.Â And that insurance really addresses the issue of affordability.Â If Congress fails to overcome this great divide, millions of consumers who have for decades been promised high-quality coverage will continue to be confused and disappointed as to why they keep paying more for less.