The Marketing of Short-Term Health Plans: Industry Practices Create Consumer Confusion

By Sabrina Corlette, Kevin Lucia, Dania Palanker, and Olivia Hoppe

A 2018 federal rule changing the definition of short-term limited-duration insurance (STLDI) has created a new marketing opportunity for insurance companies and brokers. STLDI can now be sold as full-year substitute coverage for traditional health insurance even though it is exempt from the consumer protections prescribed by the Affordable Care Act (ACA).

STLDI tends to have lower premiums than ACA coverage, but depending on how it is marketed and sold, can be risky for consumers. Many buy these plans mistakenly believing that they are as comprehensive as traditional, ACA-compliant plans. A growing market for STLDI plans also places new demands on state insurance departments, which are responsible for overseeing insurers and consumer protection. In a recently released study, we assess short-term limited-duration insurers’ marketing tactics in the wake of the new federal rules and, through interviews with insurance officials in Colorado, Florida, Idaho, Maine, Minnesota, Missouri, Texas, and Virginia, how regulators have evaluated and prepared for this new market. Key findings include the following:

  • Our marketing scan suggests that consumers shopping online for health insurance, including those using search terms such as “Obamacare plans” or “ACA enroll,” will most often be directed to websites and brokers selling STLDI or other non–ACA compliant products. These websites and brokers often fail to provide consumers with the plan information necessary to inform their purchase. Brokers selling STLDI over the phone push consumers to purchase the insurance quickly, without providing written information.
  • State officials have mixed views on short-term plans’ benefits for consumers but generally agree they pose several risks, including coverage denials because of health status, refusal to cover services because of a preexisting condition, the retroactive cancellation of coverage for enrollees with certain medical claims, and surprise balance billing because of a lack of in-network providers.
  • State officials lack comprehensive data about which insurers actively market STLDI to their residents, with one official calling it “one of our biggest blind spots.”
  • State insurance departments generally lack the authority and/or capacity to engage in preemptive regulatory oversight that would prevent deceptive marketing tactics before they occur.
  • In most states, plan and marketing standards will primarily be enforced retroactively, after insurance regulators receive complaints. Resolving the complaint in favor of the consumer is often challenging because little of the purchase transaction is documented in writing.

The full study is available for download here.

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