Semro column: Reemergence of ‘skimpy plans’ a step back
One of the issues that the Affordable Care Act (ACA) tried to address were the problems faced by “under-insured” Americans. Being under-insured meant that you had health insurance but it didn’t cover very much or didn’t fully pay for the cost of care.
Frequently, the under-insured were people who couldn’t get coverage through their employers and had to rely on plans offered in the individual insurance market.
Before 2010, the individual market was truly the “wild west.” You could be denied coverage for a pre-existing condition, plans were extremely expensive, women and older Americans could be charged substantially higher premiums and individual plans generally didn’t cover very much.
For example, if you were pregnant, your plan almost certainly wouldn’t cover it. Worse yet, there were often annual or lifetime benefit caps on claims that could lead to financial disaster. A serious injury or illness could easily bankrupt the policyholder.
ACA reforms led to a major reduction in the number of uninsured and under-insured Americans. And that led to at least one pretty dramatic payback. Medical related bankruptcies literally dropped by half (from 1.5 million to 770,000) between the passage of the ACA in 2010 and the end of 2016.
But, with the expansion of so-called “Skimpy Plans,” the path back to the old days of being under-insured may be just around the corner for unaware consumers.
In February, the Trump administration released a proposed regulation that would allow short-term limited duration health insurance policies to be extended to one year.
Short-term plans were originally designed for people who expected to be out of work and needed insurance coverage during an employment gap. These plans offered limited coverage for up to three months. Under the Trump proposal, they can be extended to 364 days and aren’t required to meet ACA requirements.
This means that insurers offering short-term plans can refuse to cover applicants with health conditions or charge them higher premiums (without limit) based upon health status, gender or age. These plans will definitely provide less comprehensive coverage since they don’t have to offer the ACA’s essential health benefits package.
Claims can be denied if the policy-holder can be found to have had a pre-existing condition. Insurers can set benefit caps on services and charge much higher out-of-pocket costs. Even the most popular short-term plans have set out-of-pocket caps between $7,000 and $20,000 per person per policy period since they’re not subject to the ACA’s $7,350 annual cap on consumer cost-sharing.
I can only see two advantages for skimpy plans: You can buy them at any time and premiums will be lower than for other policies that cover more. But in return, they may not cover common benefits such as maternity care, preventive services or prescription drugs.
Some plans may offer drug and dental discounts but that’s not the same as coverage. Premiums may be lower, but out-of-pocket costs could be much higher. In addition, there’s no guarantee that you’ll be able to renew coverage.
And, should you get seriously ill or have a bad accident, benefit caps could lead to serious and long-term financial consequences.
Even though skimpy plans offer little, systemically they could do real damage to the individual insurance market. These lower premium plans might be more attractive to younger and healthier Americans, leaving older and less healthy people in the risk pool. In March, the Urban Institute estimated that as many as 2.2 million Americans could leave the ACA compliant market as a result of longer duration skimpy plans. That’s in addition to the 5.5 million people estimated to leave the market due to the repeal of the individual mandate penalty.
According to their modeling, these two measures could increase average premiums in Colorado’s individual market by 18.3 percent in 2019.
Given all of this, some skeptics might suggest that skimpy plans aren’t really about improving health care or offering better coverage for less.
They might say that like cutting open enrollment periods, ending Cost Sharing Reduction (CSR) payments and repealing the individual mandate, skimpy plans are just another way to destabilize the individual insurance market and blame it on the so-called failure of the Affordable Care Act.
For example, it’s ironic that despite vehement opposition to the individual mandate penalty, Congress didn’t repeal it in 2017 or in 2018, but chose to end it in 2019. Those same skeptics might say that delaying the repeal was just a way to postpone the resulting and inevitable premium spike until after the 2018 midterms.
Whatever the motivations for the expansion of these policies, skimpy plans clearly have drawbacks especially if you have to use them for a significant health issue. If you’re thinking about signing up for such a plan, be sure to read the fine print very carefully because they may not be the kind of plan you were expecting.
Bob Semro of Glenwood Springs is a former health policy analyst for the Bell Policy Center, and a legislative and senior advocate.