By Rachel Schwab and Maanasa Kona
Open Enrollment for 2019 has ended in most states, but consumers are sure to be bombarded with sales pitches for alternative insurance products well beyond the December 15th deadline. Short-term plans, also called short-term limited duration insurance, are products designed to provide temporary relief for those experiencing unexpected gaps in coverage. At the federal level, these plans are not considered individual health insurance and are exempt from the consumer protections and requirements of the Affordable Care Act (ACA), such as coverage of preexisting conditions and the Essential Health Benefits or the prohibition against annual and lifetime dollar caps on benefits.
Despite these limitations, short-term plans may be attractive to consumers because they are often marketed as lower-priced substitutes for ACA-compliant coverage, even though they cover far less. Indeed, according to one national web-broker, consumers shopping for health insurance during this year’s ACA open enrollment period opted for short-term plans significantly more frequently than in years past.
Under the Obama administration, short-term plans were limited to three months with a ban on renewals. Earlier this year, the Trump administration reversed these limitations, allowing short-term plans to be sold for an initial contract period of up to 12 months and renewed for up to 36 months. While states are allowed to regulate these plans more strictly than the federal government, fewer than half of states have done so.
State insurance departments exist to protect the public interest and ensure the fair and equitable treatment of consumers. Given confusion over the state of the ACA, the elimination of the individual mandate penalty, and the expanded availability of products that do not have to comply with the health law, it has become particularly important for state insurance departments to highlight the limitations of short-term plans as consumers shop for coverage.
CHIR looked at state insurance department websites to see what information was available for consumers regarding short-term plans. We found that at least 17 state insurance departments had published press releases, consumer alerts, and other consumer-facing resources to inform consumers about short-term plans since the final rule went into effect.*
Consumer Alerts Skim the Surface of Short-Term Plan Limitations**
Almost all states that issued information about short-term plans cautioned consumers that short-term plans were allowed to exclude coverage of pre-existing conditions, and that they generally cover less than ACA-compliant plans. Further, over half of the consumer alerts we read noted that short-term plans are meant to fill a temporary gap in coverage. Many also indicated that short-term plans do not have to comply with the ACA.
Despite these warnings, most materials failed to adequately illustrate the many other limitations of short-term plans, such as post-claims rescissions (retroactive cancellation) and coverage denials. Further, only two states warned consumers that if they choose a short-term plan instead of ACA-compliant coverage, and eventually lose their short-term plan or decide that they want to switch to more comprehensive coverage, it would not qualify them for a special enrollment period.
Departments of Insurance Assume Consumers will be Able to Spot Spotty Coverage
A number of state insurance departments placed the onus on consumers to review their short-term coverage documents to ensure they understand the coverage limitations. While it is always important to review plan documents prior to enrolling, expecting consumers with varying degrees of insurance literacy to understand the caveats and exclusions in a short-term policy is likely insufficient. Numerous stories have shown time and again that consumers might not be able to understand the full extent of the limitations of short-term plans only by looking at the policy forms.
If consumers end up purchasing short-term plans, it is important that they know to reach out to their state insurance department with concerns and grievances. But many alerts failed to include adequate information about the availability of external appeals, or where consumers may submit complaints.
Other Avenues of Enrollment
This open enrollment period, consumers faced with insurance decisions may be flooded with advertisements and telemarketing calls about short-term plans. Paired with the federal outreach and advertising cuts to the ACA’s marketplaces, consumers may not know about the benefits of enrolling through HealthCare.gov, such as financial assistance with premiums and cost sharing for those who qualify.
Nearly half of the state insurance departments’ consumer alerts failed to provide information about how to enroll in comprehensive, ACA-compliant coverage. While some pointed to the ACA’s marketplaces as another way to access coverage, most failed to mention the financial subsidies that many consumers qualify for if they purchase plans on the marketplace, with some mentioning the marketplace while also asserting that short-term plans may offer “significantly cheaper” premiums than ACA-compliant plans.
State Insurance Departments Will Need to Step Up
Since the Trump administration lowered guardrails on short-term plans, these non-ACA-compliant products are expected to gain ground. However, these policies carry considerable risks for consumers, particularly if they are led to believe they can serve as an adequate replacement for comprehensive insurance that complies with the ACA. As consumers navigate the less-regulated landscape, state insurance departments’ responsibility to protect consumers may be put to the test. If states allow the sale of expanded short-term plans, insurance departments should widely disseminate information about all of the limitations of short-term plans, prominently feature avenues for enrolling in comprehensive coverage, potentially with financial help, and offer robust resources that help consumers understand health insurance policies as well as highlighting avenues through which to appeal decisions.
*CHIR conducted a scan of state insurance department websites in November 2018. It is possible that our scan did not capture every consumer-facing document published by a state insurance department. However, we believe our scan serves as an adequate representation of what a consumer is likely to find when looking for resources.
**Links to specific state materials in this section are included to provide illustrative examples of how state insurance departments are communicating with consumers about short-term plans.