Money saver or bad deal? Debate over short-term insurance policies heads to Senate

WASHINGTON – Short-term health insurance policies do not have to cover pre-existing conditions. They don't have to pay for prescription drugs. They don't have to offer maternity benefits, mental health benefits or any other minimal coverages. Nothing limits the deductible amount policyholders must pay before their insurance companies cut checks for care.

Even then, their insurance companies can spend as much of policyholders' premiums as they want on administrative costs instead of patient care.

These are among the reasons the U.S. Senate is expected to vote this week on whether to overturn a 2018 Trump administration rule that let states extend short-term, stopgap health insurance into a yearslong alternative to traditional coverage.

Minnesota-based UnitedHealthcare won't say how many short-term health insurance policies it has sold. It doesn't have to. Regulation of the policies, which make solid profits for United and dozens of other health insurance companies, is spare.

The White House says extending the length of these policies from 90 days to up to three years offers an affordable alternative for Americans who do not qualify for premium subsidies under the Affordable Care Act and cannot afford the premiums that come with the ACA's mandatory coverages. The Trump rule allows ACA subsidies to be used to promote sales of short-term policies.

Those who want to curb the expansion say it will undermine the nation's individual insurance market and health care reform by drawing away millions of the healthiest participants from the coverage pool.

Critics of short-term policy expansion include dozens of patient advocacy groups. The country's largest health insurance trade group, America's Health Insurance Plans (AHIP), says a need exists for affordable coverage choices. But AHIP remains "concerned that consumers who rely on short-term plans for an extended time period will face high medical bills when they need care that isn't covered or exceed their coverage limits."

Even in Minnesota, which limits the length of short-term health insurance to about six months with a single renewal within two years, Commerce Commissioner Steve Kelley warned that "to market these plans as a viable long-term solution ... is deceptive and dangerous."

Minnesota Sens. Amy Klobuchar and Tina Smith, both Democrats, have helped lead the opposition to short-term policy extensions.

Short-term policies are "really a license to discriminate," Smith said. "We don't need to go back to the bad old days when insurance is only for you if you don't need it."

Klobuchar said Congress and the White House "should stop encouraging the sale of 'junk' health plans and instead focus on proposals that will help bring down health care costs and lower prescription drug prices."

Yet Klobuchar, Smith and other opponents of short-term policy extensions face a stiff challenge in the Republican-controlled Senate. An October 2018 vote to overturn short-term policy extensions ended in a 50-50 tie and failed. The vote split on party lines, except that Maine Republican Susan Collins voted with Democrats. Republicans picked up Senate seats in the 2018 midterm elections.

But health care concerns also played a major role in flipping control of the House of Representatives from Republican to Democratic. Virginia Democratic Sen. Mark Warner forced the GOP to stage another vote on short-term insurance with a procedural maneuver. It could offer a preview of the role of health care in the 2020 elections.

"These [short-term] plans often pay pennies on the dollar" of medical expenses, said Sabrina Corlette, a researcher at Georgetown University's Center on Health Insurance Reforms. "They contain a lot of risks people are not aware of."

Nevertheless, Corlette continued, the plans "are now being sold as substitutes for traditional insurance."

With an average hospitalization costing $30,000, deductibles running to $10,000 per year and co-payments potentially large, Corlette said short-term policy coverage restrictions can crush a policyholder financially in a single health event.

What it comes down to for consumers is what they get for their premium dollar. A study by the Kaiser Family Foundation showed that 71% of short-term health plans examined did not cover prescription drugs, 62% did not cover substance abuse, 43% did not cover mental health treatment and none offered maternity benefits.

Insurers offering short-term policies also face no limits on the percentage of premium dollars they spend on administrative expenses. The National Association of Insurance Commissioners reports that on average, insurance companies spend about 35 cents of every premium dollar on administration rather than coverage. That money, said Corlette, can go to pay staff to look for reasons to deny payment of claims. The ACA limits administrative expenses to no more than 20 cents per dollar on individual policies and no more than 15 cents per dollar on group policies.

UnitedHealthcare declined to comment on the Senate resolution that is coming to a vote. On a company website promoting short-term policies, the nation's largest insurer made passing reference to the controversy over coverages.

"[Y]ou'll find no 'shortage' of information online telling you what Short Term Medical insurance isn't or what it can't do for you," the website says. "But for many people, and for many situations, the best Short Term health insurance plan they can find may just be the right solution."

The UnitedHealthcare website distinguishes what short-term policies sold through its Golden Rule subsidiary offer compared with ACA policies, particularly a lack of coverage for pre-existing conditions. The company stresses lower premiums, not comprehensive coverage.

"Since a Short-Term insurance plan isn't required to include the 10 essential health benefits defined in the ACA, you can choose a less expensive plan that offers less coverage," the website says.

Blue Cross and Blue Shield of Minnesota stopped selling short-term health policies in 2015. Scott Keefer, the company's vice president of public affairs, does not believe extending the length of short-term plans is a viable way to increase health insurance coverage and reduce health care costs in the country. Keefer predicted that the practice would create parallel insurance markets, one with younger, healthy policyholders and one with older, less healthy policyholders.

Even for the healthy, Keefer likened the lure of cheap premiums and poor coverage to an economic chimera. If it seems too good to be true, Keefer noted, it probably is.

Jim Spencer • 202-662-7432