Separating Fact from Fiction About Short-Term Medical Insurance Plans
The urban myth. The tall tale. Sometimes a story sounds so good, rings so true, well, it just has to be accurate. But, it is not.
As a cancer survivor, I am here to say such is the myth of short-term medical as “junk” insurance.
Recently a federal judge hinted that he would not overturn the Trump administration rule to limit short-term medical plans to three months, citing a lack of evidence that it has harmed consumers. He is correct.
For more than 30 years I have been involved in the short-term medical (STM) market, along with other types of niche insurance: as an agent, as a company executive, as an advocate for change and as a consumer myself. Millions of people need temporary insurance coverage – for all kinds of reasons. Evidence suggests that there are at least 10 niche markets for short-term medical, each influenced by circumstances and timing.
Based on my experience, about 750,000 to 1 million people are enrolled in STM plans. The market may be returning to its normal size because of new rules put out by the Trump administration. But remember, STM plans are not ‘permanent’ health insurance and never have been.
But let’s understand that the very nature of ‘permanent’ has changed in the new gig economy. More than 50 million people work multiple part-time jobs. Gig workers are more mobile. They often have gaps in employment, and their income tends to fluctuate. People who were otherwise uninsured are buying health insurance, and, yes, sometimes it is an STM plan.
Let’s also look at the data. Since April 2018, my organization has paid $61,000 in claims for an insured’s atrial fibrillation, $86,000 for an insured’s lung cancer treatment, and $206,000 for a 26-year-olds invasive cancer diagnosis, just to outline a few cases. Each month we help more than 5,000 members save an average of 40 percent on prescription drugs costs, and have paid out nearly $300,000 in Rx claims for the first quarter of 2019 alone.* Are these paid claims by ‘junk’ insurance meaningless to insureds who were not subject to catastrophic medical debt? One would assume not.
With that, let me debunk ten “myths” about short-term medical plans, and end with one truth:
Myth 1: You can’t enroll in an STM plan if you have ever been sick.
Not true. I am a colon cancer survivor and have heart stents and was recently temporarily enrolled in a STM plan when I moved from Minnesota to Arizona in the Fall of 2017. True, most STM plans have limitations for medical treatment received in the last one to five years, depending on the state.
Myth 2: The existence of STM plans may raise the cost of insurance for those enrolled in ACA plans.
As the old Wendy’s commercial stated: “Where’s the Beef?” There is no fact-based evidence that says the existence of STM plans raise the cost of insurance.
Myth 3: STM plans are the reason that there was a slight downturn in people enrolled in Obamacare plans.
False. The “culprits” include growth in faith-based – health sharing ministries – plans, which are exempt from insurance regulation, the high cost of ACA plans for those not subsidy eligible, , the increase in the number of workers covered by small and large employer insurance plans. The economy is good, and unemployment is low, which leads to fewer people seeking insurance in the individual market.
Myth 4: STM plans must be bad because big insurance companies don’t offer them.
Not true. The largest health insurer in the world offers STM plans, as do several Blue Cross organizations. In many states – and particularly in rural areas – there is a clear lack of choice and options in ACA. STM is a temporary safety net.
Myth 5: Most people can’t be approved for these plans because of pre-existing conditions.
False. Public data by eHealth and other companies suggest nearly 9 of 10 who apply are approved.
Myth 6: Only young people are enrolled in STM plans.
At Pivot Health, the fastest growing segment of our customers are those over age 60. Those not eligible for Obamacare subsidies, have few good choices, especially for those over age 60. How many 64-year-olds are most interested in unlimited lifetime benefits when they are a year from Medicare?
Myth 7: Consumers complain about STM plans way more than other insurance.
The National Association of Insurance Commissioners publishes information about all types of insurance companies and complaint ratios. We have found that there is one complaint for every 3,000 members.* Carriers who underwrite STM plans fare no better or worse than the entire insurance industry.
Myth 8: People are better off being uninsured than paying for an STM.
Some say that if you don’t have any insurance, hospitals and doctors will still provide care while the cost is shifted to others and a consumer would have to spend down their assets and go on Medicaid. Is that really an American solution?
Myth 9: Only STM plans cancel policies because of consumer fraud.
Any material misrepresentation or outright fraud can result in a consumer having their insurance canceled. This is true for life insurance, auto insurance, and for the plans made available at healthcare.gov.
Myth 10: Insurance agents who sell STM make huge profits.
On average, an insurance broker is paid about 50% less when selling an STM plan vs. an ACA plan.
STM provides real solutions to those who have a temporary need. Here is the the truth: one size won’t ever fit all and the demand for tailored, consumer-directed insurance solutions will accelerate as America transitions to a “gig” economy.
STM is not junk insurance. It is gig insurance that meet the needs of a changing economy, for some people, some of the time.
*Based on Q1 claims data provided by Pivot Health.
Jeff Smedsrud is co-founder and chief executive officer of Pivot Health, He has started and led several insurance companies and been active in public policy discussions about health care reform.