On February 13, Pennsylvania’s Insurance Commissioner Jessica Altman testified before the U.S. House Committee on Energy and Commerce’s Subcommittee on Health to voice concerns about the potential harms of short-term limited duration health insurance. Unlike individual marketplace plans that must comply with the Affordable Care Act’s (ACA) consumer protections, short-term insurance is held to a lower bar. Insurers that sell short-term policies can decline to enroll individuals with pre-existing conditions and commonly exclude basic health services from these plans, such as preventive services, maternity care, mental health and substance use services, and prescription drugs. Other benefit designs may be less clear to enrollees, such as limits on how much the insurer will reimburse for a hospital stay or ambulance ride, and exclusions for conditions arising from hazardous activities. As a result, consumers that enroll in short-term insurance need to be aware they are at increased risk of having claims denied and may be on the hook for greater financial liability than anticipated.
Stakeholders have expressed mixed views on short-term insurance. Some, such as brokers and agents selling the products, believe short-term insurance has a role to play for consumers seeking cheap, temporary coverage, as they transition between comprehensive plans. Others, such as consumer advocates, providers, and some health insurers, believe the gaps and risks associated with short-term policies outweigh any potential value. However, all seem to agree that, at a minimum, consumers should know what they are purchasing.
However, in her testimony, Commissioner Altman explained that this is rarely the case and, in fact, consumers often purchase short-term insurance without understanding its limitations. One reason for this is because short-term plan disclosures explaining the plan’s limitations and exclusions “tend to stink.” Whether it is significant coverage exclusions buried in the fine print or policies sold without provider directories or formularies, it can be challenging for consumers to understand what their plan covers.
In the final rule expanding the availability of these plans, the federal government required that all short-term policies contain a basic consumer disclosure stating that:
- This coverage is not required to comply with certain federal market requirements;
- Consumers should check their policies for exclusions and limitations relating to pre-existing conditions and health benefits;
- Policies may have annual or lifetime dollar limits on benefits; and
- If consumers lose eligibility for short-term coverage or their coverage expires, they may have to wait until the next open enrollment period to get new coverage.
Beyond this text, states have the authority to require that their insurers provide additional disclosures. For example, America’s Health Insurance Plans (AHIP) previously recommended that such disclosures should also include the fact that premiums may take into account a consumer’s age, gender, and health conditions, or that the plan may limit how much it will pay for care in a single day. As the marketing of these policies has increased, states have taken varying approaches on what their short-term disclosures must include. We looked at short-term disclosures in four states – Nebraska, North Dakota, Ohio, and Washington – and found that a wide spectrum exists regarding the amount of detail states require their insurers to disclose.
Ohio and North Dakota have largely defaulted to the minimum federal language. Ohio requires only the text that is federally mandated, and the state does not limit the sale of short-term insurance more strictly than the federal government. North Dakota uses the federal disclosure language, but has required that insurers include four questions on all short-term applications, which must be answered before a consumer can enroll. For example, the consumer must answer affirmatively: “Are you aware that this insurance coverage is NOT a comprehensive major medical policy?” The state also requires applicants to initial next to the statement: “I understand that this policy may not have network doctors and therefore may result in a bill to me for additional charges not covered by a doctor that is out-of-network with this plan.” North Dakota limits the initial length of a short-term plan to 185 days, but allows the plans to be renewed.
While Nebraska does not limit the duration of short-term health plans, it requires a number of additional disclosures, ranging from contract length to renewability and provider networks. It requires that an insurer list “any reasons that it may choose to not renew a policy,” and whether additional underwriting will occur at the point of renewal. If additional underwriting may occur, insurers must explain how it could impact a consumer’s ongoing costs and coverage. The state also requires insurers to provide a comparison of covered benefits under a short-term plan versus those provided by an ACA plan. If the plan provides a benefit at a lower level of coverage than the ACA mandates, it must provide an explanation to prevent consumer confusion. This could take the form of a comparison chart.
Washington, in addition to limiting the length of short-term plan contracts to 3 months over a 12-month period, requires disclosure language that more plainly distinguishes short-term policies from ACA coverage, including a summary of the benefits the short-term plan will provide. For example, the disclosure must include a “Caution” box at the top of the document stating that the short-term plan “does not include benefits required by the Affordable Care Act,” and that “[i]t’s temporary.” The disclosure encourages consumers to check to see if they are eligible for marketplace coverage first and that they may be eligible for financial assistance in lowering their premiums. Insurers must clearly answer a series of questions with definitive “Yes” or “No” responses, such as, “Does this policy cover pre-existing conditions?” If the plan does include benefits like emergency room services and prescription drugs, it must list any cost sharing, treatment limits, or policy caps.
While other states are looking to strengthen short-term plan disclosure requirements through legislation, it is worth noting that many, like D.C. and Illinois, are among the states that already impose stricter limitations on the short-term market. Though educating consumers is critical, strong disclosure requirements may be, arguably, more needed for consumers in the states where short-term plans are not limited or closely regulated. Still, given how aggressively short-term plans are currently being marketed, there is no guarantee that even with a strong disclosure, or a consumer’s attestation that they read the disclosure, that the enrollee understands what the limitations mean in terms of their coverage or financial liability.
Take-Away: It remains to be seen whether the additional disclosures required in Nebraska, North Dakota, and Washington will result in better-informed consumers or fewer people purchasing a short-term plan in the mistaken belief it provides comprehensive coverage. However, expanded disclosure requirements reflect a widespread belief among both proponents and opponents of short-term plans that consumers should at least be educated about the products they are purchasing and enroll with their eyes wide open. Strong disclosures are the minimum that is necessary for states to protect consumers. However, they should not be a substitute or cover for more proactive state regulatory oversight and strong consumer protection laws.