People who turn to short-term, limited-duration health policies rather than purchasing coverage required by the Affordable Care Act to meet standards in types and levels of care provided could be in for a rough ride, both financially and in terms of available care.

That's according to a research report from Milliman, which analyzed how the expansion of STLD policies and other regulatory action have affected enrollment levels as well as how much patients pay in premiums and medical costs.

While healthier people might opt for STLD policies to save money on premiums, they get less bang for their buck and could be letting themselves in for substantially higher costs should they need to seek treatment. For instance, such policies aren't required to cover two of the essential health benefits mandated by the ACA—prescription drugs and mental health benefits—and most don't.

In addition, most STLD policies come with coverage limits that also aren't allowed under the ACA, meaning that they could end up on the hook for substantial portions of any care they may receive.

The report highlights how dramatic this could be in the hypothetical case of a 'newly diagnosed lymphoma patient enrolled in an STLD policy in 2017 [who] could pay $16,800 more in out-of-pocket expenses, including premium and member cost-sharing, within six months following diagnosis than a lymphoma patient enrolled in an unsubsidized ACA-compliant policy."

And yet another drawback is that STLD policies aren't guaranteed renewable, so should a policyholder be diagnosed with a new condition while covered by a short-term policy, he may be left uninsured at the end of the insurance period and have to wait for ACA open enrollment or a special enrollment period just to get coverage again. In the meantime, he could be stuck with substantial bills that will be his own responsibility to pay, not the insurer's.

This makes for another hefty financial penalty (not to mention the mental stress). According to the report's authors, "We found that a patient who is denied STLD renewal three months following a diagnosis of lymphoma could be responsible for nearly $40,000 more in out-of-pocket expenses in the six-month period following diagnosis than if the same patient had been covered under an ACA-compliant individual policy for the same period."

Then there are the effects of regulatory actions. Unsubsidized ACA individual market premiums are expected to increase by approximately 4 percent in 2020 among states with full expansion of STLD policies thanks to such actions, according to the report, and while not all carriers broke down the causes of their projected price increases, most carriers that "explicitly adjusted ACA-compliant premiums for the impact of the STLD plan expansion attributed a premium increase between 0.5 percent and 2 percent in 2020" to that expansion.

Last but not least, the report estimates that 6 percent of members in the ACA-compliant individual market will end up moving to nonminimum essential coverage, which includes people who choose to forgo coverage and those who enroll in STLD policies, by 2021—thanks to the selection dynamics created by STLD plan expansion and mandate repeal.

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Short-term insurance policies driving higher costs, coverage gaps

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