Ten years ago, insurers often sold short-term health insurance policies with annual benefits caps under $50,000.

Today, market forces are pushing the typical annual benefits cap over $500,000, and a Republican state legislator from Indiana is backing a short-term health insurance model law that could set the minimum annual benefits cap at a higher level.

The Health Insurance & Long Term Care Issues Committee, an arm of the National Council of Insurance Legislators (NCOIL), has given outsiders a peek into the evolution of short-term health insurance coverage in draft minutes for a session that took place in July, at an NCOIL meeting in Newport Beach, California.

The committee put the draft minutes in its part of the document packet for NCOIL's upcoming annual meeting in Austin, Texas.

Short-term health insurance policies are in the news partly because the administration of President Donald Trump has proposed letting the policies stay in effect for up to 364 days per year, be renewable for up to three years in states that allow that, and be presented as an affordable alternative to individual and family major medical policies that comply with the Affordable Care Act benefits, pricing and underwriting rules.

The ACA exempts short-term health insurance from those rules.

NCOIL is a group for state-level lawmakers with an interest in insurance. It has no ability to set insurance laws itself, but state lawmakers may use NCOIL models to draft their own proposals.

Indiana state Rep. Martin Carbaugh, R-Fort Wayne, Ind., has sponsored a Short Term Limited Duration Insurance Model Act draft that would:

Set the minimum annual policy limit at $2 million or higher.
Allow underwriting only when a policy is first purchased, not when a policy comes up for renewal.
Require a policy to cover hospitalization, ambulatory patient services, emergency services and laboratory services.
Establish provider network adequacy standards for plans with provider networks.
Require the issuer to inform a purchaser about the purchaser's opportunity to participate in the next Affordable Care Act open enrollment period for individual major medical coverage.
Prohibit an issuer from basing the price of the coverage on an individual's health.

An insurer could use medical underwriting when it was deciding whether to issue a policy, and it could exclude coverage for preexisting conditions.

Carbaugh is a financial planner who belongs to the National Association of Insurance and Financial Advisors, according to his official biography.

The model law draft is similar to a bill Carbaugh authored and passed in Indiana, according to the draft minutes from the July meeting.

Jan Dubauskas, senior counsel at Health Insurance Innovations Inc., an insurance brokerage firm that has been selling short-term health insurance for years, said she thinks brokers would like to see more benefits and disclosure requirement standardization, to protect consumers and ease the difficulty of complying with different states' rules, according to the draft minutes.

Dubauaskas said the typical annual benefits maximum today is about $500,000 to $1 million.

Increasing the maximum to $2 million might increases the price about 3% to 14%, she said, based on conversations with members of Health Insurance Innovations' actuarial team.

Jeff Smedsrud, president of Pivot Health, a coverage program manager, said he believes that concerns of short-term health insurance issuers rejecting applicants with health problems have been exaggerated, according to the draft minutes.

Issuers are now taking about 90% of the applicants, he said.

Pivot Health has seen about 70,000 claims, and allegations of material misrepresentation led to fewer than 50 policy rescissions, Smedsrud said.

Many states let an issuer look back five years for evidence of material misrepresentation, but the issuers themselves are now trying to be friendlier toward consumers by limiting the lookback period to two years, Smedsrud said.

Smedsrud said one obstacle to increasing the minimum annual benefits maximum is that issuers might keep premiums low by increasing the deductibles to very high levels, such as $20,000.

Carbaugh said he ran a quote for a six-month plan for a 59-year-old female in Wisconsin, with a $5,000 deductible, 60/40 coinsurance, a $10,000 out-of-pocket and a $250,000 annual maximum benefit, according to the draft minutes.

The cost for that policy would be $175.20 per month, he said.

Increasing the maximum to $2 million would increase the premium to just $188.40, he said.

Carbaugh said he thinks it would be malpractice to recommend the $250,000-maximum policy to save so little money.

A copy of the short-term health insurance discussion account is available here, in NCOIL's latest 30-day meeting materials packet.

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