The short-term health plans touted by the Trump administration continued to shell out few dollars on members’ medical claims in 2019, according to the latest data from the National Association of Insurance Commissioners.
The NAIC’s 2019 Accident and Health Policy Experience Report also confirmed that enrollment in the notoriously skimpy policies, which don’t have to cover pre-existing medical conditions, spiked last year after the federal government finalized a rule in August 2018 allowing the plans to last up to 364 days and be renewed for up to three years. The Obama administration had limited the duration of the policies to up to three months.
The NAIC data is imperfect. It likely captures just a fraction of the market for short-term, limited-duration health coverage, as these policies often fly under the radar of insurance regulators. The data also reflects enrollment in the plans at a point in time and not over the course of the year, so customers who had a policy but dropped it before then may not be counted.
Still, the report sheds some light on enrollment trends and spending among short-term plans. Health insurers selling the plans reported an average loss ratio of 61.6%, meaning they spent roughly 62 cents of every dollar they collected in premiums on members’ medical claims. The average loss ratio among the five insurers that earned the most premiums from the plans was lower at about 55%, the data shows.
In contrast, Affordable Care Act-compliant insurers must meet a minimum medical-loss ratio of at least 80% or else rebate the difference to customers, but short-term plans are not subject that requirement.
“They offer weaker coverage with more caveats that allow them to not pay,” explained Justin Giovannelli, project director at the Center on Health Insurance Reforms at Georgetown University. “The protections are just not there.”
Insurers enrolled 188,000 people in short-term plans at Dec. 31, 2019, and collected $248.2 million in short-term plan premiums, according to the NAIC. The year before, short-term health plans enrolled 86,600 people and collected premiums of $109.6 million, according to the NAIC’s previous report. The loss ratio among the five short-term health insurers with the most premiums in 2018 was 39.2% on average.
“The fact that (enrollment) increased by such a large margin certainly suggests to me that it’s a growing market segment because the rules have been relaxed,” Giovannelli said, though he cautioned against putting much stock in the absolute numbers given the challenges the NAIC has had in collecting data on the plans.
Short-term health plans don’t have to cover pre-existing health conditions or the ACA’s 10 essential health benefits. They regularly deny claims or rescind coverage after a patient receives an expensive medical bill, putting patients at risk.
A June report from the House Energy and Commerce Committee gave a comprehensive look at the short-term health insurance market. It estimated that roughly 3 million people were enrolled in short-term plans sold by eight insurers over the course of 2019. The median medical loss ratio across these companies was 48%.
The committee’s investigation found that customers are often in the dark about short-term plan exclusions or other limitations. The plans commonly exclude coverage for common conditions including diabetes, cancer, heart disease, arthritis, substance use and mental health disorders, the committee found. Prescription drugs, rehabilitation services, and maternity and newborn care are also not covered.
Even so, the Trump administration has touted them as a good option for people who can’t afford ACA coverage but earn too much income to qualify for a federal subsidy. The administration’s expansion of the plans, coupled with Congress’ move to zero out the individual mandate penalty starting in 2019, opened the door for more people to seek short-term coverage.
Critics worried that certain ACA exchange customers might ditch their compliant plans to buy a short-term policy, potentially causing premiums to rise in the individual exchange market.