Dania Palanker wanted to find out what kind of short-term health insurance plan she could get, a plan that only lasts for three months and can cost much less than some Obamacare exchange plans. On a website, she plugged in her age, 43, and listed her location as Louisville. Of the results, Palanker said one of the seemingly better plans costs $393 a month, which she said is much cheaper than she could get on an Obamacare exchange.
"But then I started looking at the details," she said. "They only covered $3,000 towards prescription drugs, but if I ended up needing an expensive drug, I'd end up hitting a max. They exclude certain pre-existing conditions, birth control, pregnancy overage and mental health."
Then Palanker read the fine print of the insurance policy.
"Some hospital services aren't covered, [like] if you're admitted on a Friday or Saturday for a non-emergency," she said. "If you didn't know to read through your insurance, to think that could become problematic."
In that situation, the policyholder would have to pay for the hospital visit.
Palanker doesn't actually need insurance. She's an assistant research professor at Georgetown University's Health Policy Institute, but what she described is a situation many Kentuckians could find themselves in later this year if they buy a short-term, "bridge" insurance policy.
A Longer Short-Term
These types of plans have been around for decades. Right now, the three-month, short-term plans are marketed to people in-between jobs or students right out of college.
A report by the federal government estimates there were fewer than 200,000 people with these plans last year, but that's expected to increase by more than 600,000 by 2019. That's because recently, the Trump administration changed the law and in 2019 the plans will be allowed to last a little longer — up to a year.
When you combine that with President Trump's recent move to do away with the individual mandate, it makes short-term plans more attractive. That's partly because right now, short-term plans don't technically count as "insurance" under federal definitions. So if you have a short-term plan you have to pay a tax penalty. When the individual mandate goes away next year, so will the fine.
Thrown into the mix are people who never qualified for federal financial help to buy a plan on the Obamacare market — people who make too much money but still find the plans too expensive. Those factors together? That’s a lot of forces pushing people toward short-term plans.
Jan Dubauskas is general counsel for the IHC Group, which sells short-term plans in Kentucky. She said even though their plans don't cover prescription drugs in general, they do cover drugs if an enrollee is in the hospital. And the company has a plan for people with pre-existing conditions — it's just more pricey and only covers up to a certain amount.
Dubauskas said that right now, many people still choose to pay the individual mandate penalty because it's cheaper than buying a plan on the exchange. Without the mandate, these plans offer limited — but viable — insurance.
"Short-term medical is much more affordable than Obamacare because of the difference in benefit, and that’s another thing that makes it attractive for consumers," she said.
'It's not even a comparison"
Another possible driver to short-term plans: insurance brokers.
Before the Affordable Care Act was passed, some health policy experts and brokers thought the business of helping people buy insurance was over, with easier ways to sign up online with the state and federal exchanges. But the ACA turned out to be good business for brokers, in helping people enroll and figure out subsidies.
Obamacare insurance plans also paid brokers for enrolling people. But over time, those commissions dried up.
Insurance brokers who still sell Obamacare market plans now get little to no commission. But, they get a healthy commission for selling short-term plans, according to Cody Michael, director of client and broker services at brokerage firm Independent Health Agents.
Michael said Obamacare exchange market insurers might pay between $0 to $20 a month for a person enrolled. Meanwhile, short-term plan insurers pay up to 30 percent of whatever the plan costs.
"They pay so much better than the individual market, at this point, it’s not even a comparison," Michael said. "You're making hundreds of dollars off of one person versus, you know, whatever bones the big carriers are throwing you on the individual market."
Palanker with Georgetown University’s Health Policy Institute said more money, combined with not having to calculate a client’s potential subsidy to help pay for coverage, could drive brokers to push these plans.
"So it's more money and less work," Palanker said. "That provides more incentive for brokers to offer these plans."
But Joel Thompson, an insurance broker in eastern Kentucky, worries that these plans will be so much more attractive, that they will draw people away from the Obamacare marketplace, leaving only the sicker — and more expensive — policyholders left. That could drive insurers to leave the marketplace, or jack up prices even more.
"That's the real danger of the short-term plans, that they will wreck the [Obamacare] market from within, and it will fulfill the prediction that President Trump made of the ACA imploding," Thompson said.
Thompson said he doesn’t recommend these plans to his clients.
"What I usually tell them though, is [short-term plans] have more holes than Swiss cheese," he said.
Currently, a short-term plan can be renewed in Kentucky every three months, but the deductible — or the amount a person has to pay before insurance starts to pay — is reset every three months.
This is important to people diagnosed with chronic illness.
"Right now if you got diagnosed, by the time you go to renew, that [illness] is now considered a pre-existing condition and wouldn’t be covered on your next plan," Michael, with Independent Health Agents, said.
'Very few people know what they're buying'
Sheila Schuster, a health care advocate in Kentucky, worries that consumers considering short-term plans won't understand what they’re buying.
"Very few people know what they're buying when they're buying an insurance policy," Schuster said.
In 2014, the Kaiser Family Foundation surveyed the public on health-related topics including out-of-network, drug formularies, out-of-pocket limits and how to calculate the cost of a hospital stay. Of the 1,292 adults surveyed, nearly a third gave correct answers to four or fewer questions.
Dania Palanker recommends that consumers consider the entire cost of a plan, and what they’d pay in the event that a short-term health plan doesn’t pick up part of a medical bill.
"Before assuming that the short-term plan is going to be the least expensive option for you, make sure you find out what truly is the price of the plan," Palanker said. "Anybody enrolling in these plans should make sure they read all of the information before signing up."
It's up to states to decide if these plans can be sold for year-long periods. Spokeswoman Susan West with the Kentucky Department of Insurance, said the state is reviewing the new policy internally.
"If necessary [we'll] promulgate a regulation or recommend legislation if the Department determines changes to the federal regulatory requirements are necessary to protect Kentucky consumers," West said.
Indiana, meanwhile, currently restricts these plans to six-month terms and does not allow for renewals.
"In regards to the recently finalized rule, the [Indiana Department of Insurance] is reviewing and discussing the provisions of the final rule and its final impact on Indiana," said spokeswoman Jennifer Groth.
States are also allowed to include a "renewability guarantee" in short-term plans, which would cost a percentage of a monthly premium and protect consumers from premium increases or coverage denials should they fall ill.