Are cheap, short-term health plans a good option?

Aug. 08--The Minnesota Council of Health Plans hasn't taken a position on a new policy initiative out of Washington, the permission to issue cheap, short-term medical insurance policies for up to three years.

It's a hot topic, but our main health plan trade group hasn't stated an opinion because its members apparently can't all agree on this one.

You can imagine the debate. On the one hand, there has to be a cheaper option for people who earn too much to qualify for a government subsidy for conventional plans that meet the rules but can't really afford them. So these short-term plans, however imperfect, are better than nothing.

Not so fast. These short-term medical policies will attract younger and healthier people, leaving only older and sicker people in the conventional market and maybe dragging it down. Plus a bunch of families won't realize how little insurance they have really bought until they find themselves denied coverage and then lose their house. So these short-term plans are a cure much worse than the disease.

Picking the right side in this conversation isn't a no-brainer.

That the Minnesotans in the industry can't seem to agree is at least a little newsworthy, because these kinds of plans sure aren't very popular here. The likelihood of what's effectively a three-year, bare-bones insurance product being approved by our state seems very low, at least the way that things stand now. Of course, there's an election coming.

Short-term medical insurance got its name in an obvious way, by generally being available for only 90 days. The new guidelines out of Washington effectively allow them for a year, with the ability to be extended for two more years. That means a skinnied-down health insurance policy originally designed as a stopgap can be used for up to three years.

There's not a much of a market for them now because there aren't that many circumstances in life where having a genuinely short-term plan makes a lot of sense, limited to situations like that of a person who is finishing school and not yet eligible for the group insurance plan at a new job.

For most everyone else, there's open enrollment every year, plus rules that allow people going through life events such as a divorce to get new insurance during the year.

"The devil in all these short-term plans is in the details," said Milt Edgren, a veteran insurance consultant and principal with Golden Valley-based Woodhill Financial, meaning all the ways listed in the contract that the insurance company won't pay.

Edgren isn't much of a fan, in part because they clearly remind him of the so-called junk insurance plans sold before the ACA took effect. In some states "insurance" plans for a whole family had cost just $100 a month. That's certainly cheap enough, but consumers later found out that all they really provided was some reimbursement for room and board during a hospital stay.

That expensive imaging exam? That's your problem. Same for the chemotherapy treatments keeping mom alive.

Getting rid of policies like this was one of the goals of the ACA, as far too many consumers made it through a health crisis only to find themselves in a financial crisis, even though they had faithfully paid their premiums.

The ACA made a lot of things essential that you would expect, such as emergency services and hospitalization. But the minimum standard also included coverage for prescription drugs, maternity and newborn care, treatment for mental health disorders and so on.

Pre-existing conditions

The ACA also banned the practice of denying coverage for a pre-existing health condition. This aspect of the ACA remains popular, and a recent poll by the California-based Kaiser Family Foundation found that maintaining protections for pre-existing conditions was the top health concern of voters this summer.

In a brochure for a short-term plan available here in Minnesota through Medica's website (but not issued by Medica), the second paragraph made it perfectly clear that a short-term medical insurance policy was for people waiting to get conventional coverage, not a substitute for a plan that met the standards of the ACA.

Further down it got to pre-existing conditions, explaining how the policy wouldn't cover anything that received treatment or even led to a consultation within the previous five years.

What wouldn't be covered turned out to be a much longer list than what was covered, and in smaller type. Slip off your ATV and get injured, and that's your problem. Same with racing a sailboat.

One exclusion was particularly eye-catching, just for the creepy way it got stated: "Suicide or attempted suicide or intentionally self-inflicted injury, while sane or insane."

So why would somebody allow consumers to buy policies like this that could last for years?

Proponents have a consumer in mind: a family that makes too much money to get subsidies for ACA-compliant plans but not nearly enough to easily pay for one. For a family of two, subsidies for private health plans fall away as household income approaches $65,000. Price-checking online for a "peak bronze" plan for a baby boomer husband and wife here in the Twin Cities turned up a cost of nearly $1,100 per month, with a $13,300 deductible.

That could be enough to drive people out of the regular insurance market. Of the options they have, a short-term plan to help with unexpected expenses may be the least bad.

Champions of insurance products like these short-term medical plans, however, seem to gloss over at least one detail when stumping for them. By calling it "much less expensive healthcare at a much lower price," the president masked the fact that there's going to be nothing different about the size of the bill for health care services. It's just a different way to try to pay for it.

The real problem, of course, is not that health insurance costs so much. It's that health care does.

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