Democratic lawmakers at the House Energy and Commerce Committee who hate short-term health insurance have found that the market for that product looked great in 2019.

Nine insurers that provided data for committee investigators said they had 3 million short-term health insurance enrollees in 2019, up 27% from the number of enrollees they had in 2018.

Enrollment in short-term health insurance policies through association programs increased to 2.2 million in 2019, from 600,000.

Fourteen issuers and distributors that work with brokers have been paying brokers commissions from 10% to 40% to sell short-term health insurance, with an average commission rate of 23%, committee officials write in a report summarizing the investigators' work.

A link to the House Energy report on short-term health insurance is available here.

That compares with a typical commission of about 2% for individual major medical insurance plans that meet Affordable Care Act (ACA) individual major insurance standards, officials write.

Defenders of short-term health insurance contend that the product can provide modest amounts of coverage, at a relatively low price, for healthy, uninsured consumers who have a temporary need for coverage and who do not want to go through through the ACA major medical insurance application process; need to buy coverage outside the ordinary, Nov. 1-Dec. 15 individual major medical insurance open enrollment period; want lower deductibles and bigger provider networks than typical individual major medical policies offer; or do not qualify for enough ACA premium tax credit subsidies to make individual major medical insurance coverage affordable.

House Energy officials contend in their report that, too often, insurers and brokers generate short-term health insurance sales by misrepresenting the nature of the product.

Some short-term health insurance issuers, for example, have said that they are offering COVID-19 testing benefits, even though the temporary federal COVID-19 testing benefits mandate exempts short-term health insurance issuers.

House Energy officials cite a survey that the Brookings Institution conducted. Analysts there conducted a "mystery shopper" survey of nine agents and brokers in the short-term health insurance market, which the federal government now officially calls the "short-term, limited duration insurance" (STLDI) market.

Agents and brokers "'often significantly overstated the degree of coverage a [STLDI] plan would provide and sometimes misrepresented the terms of the plan,'" House Energy officials write. "In addition to significantly misrepresenting the nature of STLDI coverage, agents and brokers also gave either misleading or false information about the circumstances in which COVID-19 symptoms, diagnosis, and treatment would be considered a preexisting condition."

The history

Before 2014, when most of the ACA major medical insurance standards and medical underwriting ban took effect, most states let both short-term health insurance issuers and major medical insurance issuers use medical underwriting.

Issuers of both types of coverage could decide what they wanted to cover and put annual and lifetime caps on benefits payments.

In 2014, the ACA began to keep major medical insurance issuers from using personal health factors other than location and age in decisions about whether to sell coverage, and from using health factors other than location, age and tobacco use when pricing coverage.

The ACA also imposed many benefits mandates, including bans and annual caps on annual and life benefits for covered "essential health" services, such as inpatient health care.

The ACA imposed loose provider network adequacy and maximum out-of-pocket spending limit rules.

The ACA rules mean that anyone can now buy individual major medical insurance, and get unlimited coverage for catastrophic problems, such as organ transplants, but that an individual who buys the cheapest coverage and gets a broken leg or a ruptured appendix may have to choose from a short list of available doctors, and face a 2020 annual individual deductible of $6,900. Many of those policies pay for non-emergency care only in the local area.

Many uninsured people have reasons for being uninsured that would give them the ability to buy individual major medical insurance at any time of the year. But the ACA "open enrollment period" system would keep many uninsured people from buying individual major medical insurance at all from Dec. 16 through Oct. 31.

The ACA drafters included a provision that let regulators exempt short-term health insurance from the ACA major medical benefits and underwriting rules.

In many states, a short-term health insurance issuer can still use medical underwriting, exclude coverage for pregnancy and mental health care, and design the benefits however it wants.

The result is that, in a state like Missouri, which is warm to short-term health insurance, a 35-year-old woman in Kansas City with serious health problems might not be able to get any short-term health insurance.

A healthy 35-year-old woman in Kansas City could get three months of short-term health insurance from Blue Cross and Blue Shield of Kansas City, with access to out-of-area health care providers, and a $2,500 deductible, with a $5 million lifetime coverage maximum, for less than $85 per month, according to Kansas City Blue.

If she wanted to keep similar "short-term" coverage in place for about a year, with generic drug coverage, she'd pay about $160 per month.

The woman would need to qualify for a special enrollment period to buy major medical insurance through eHealth right now. If she qualified to buy major medical insurance, but did not qualify for premium tax credit subsidies, she'd have to pay at least about $400 per month. The lowest deductible available would be just $1,600, and she'd get access to pregnancy and mental health care benefits, but the coverage would come from a carrier that's little known in Kansas City, and she'd have to choose from a limited list of doctors.

The politics

For health insurance company actuaries, one terror is the possibility that a competing health insurer facing less restrictive rules will be able to use lower prices to lure away younger, healthier members, and kill off the insurer that's forced to offer better benefits.

Because of that "antiselection" concern, many health insurance company executives see the existence of loosely regulated short-term health insurance policies as a threat to the stability of the ACA-compliant individual major medical insurance market, and to any other efforts to sell individual major medical insurance without medical underwriting.

When Barack Obama was president, federal regulators tried to address that concern by capping the duration of short-term health insurance policies at three months.

The administration of President Donald Trump has set regulations that give states, and insurers, the ability to use extensions to keep the same short-term health insurance coverage in place for up to three years.

Some states, such as California, have responded by banning the sale of any short-term health insurance.

Other states, such as Colorado, have tried to find middle ground, by imposing some benefits and underwriting rules and short-term health insurance, but by leaving out rules that seem to be a poor fit for short-term health insurance.

The most visible House Democrats are now extremely hostile toward short-term health insurance. In the press release announcing the new short-term health insurance report, for example, House Energy leaders call all short-term health insurance policies "junk plans."

House members voted 234-179 Monday to pass H.R. 1425, a bill that could impose a three-month federal statutory cap on the duration of short-term health insurance coverage.

More House Energy findings

In the new report, House Energy officials include many attacks on how insurers, agents and brokers describe short-term health insurance policies and the policies' coverage limitations.

They also criticize the fact that short-term health insurance policy issuers spend about 48% of premium revenue on health care, while individual major medical plan issuers spend more than 80% of their premium revenue on health care.

Short-term health insurance defenders have acknowledged in the past that explaining product limitations clearly is important, but they have argued that medical cost ratios tend to be high partly because the monthly premium for short-term health insurance is so much lower, and short-term health insurance issuers face many of the unavoidable administrative and compliance costs that major medical insurance issuers face.

If, for example, a 35-year-old woman in Kansas City, Missouri, paid $85 for short-term health insurance, and about half of the premium went toward items other than health care, she'd be spending about $42.50 per month on items other than health care.

If she were paying $400 per month for major medical coverage, and 15% of her premiums went to items other than health care, she'd be spending $60 per month of that amount on items other than health care.

House Energy officials contend the short-term health insurance issuers often apply coverage rules and claim documentation requirements in ways that make collecting on claims difficult.

House Energy officials also look at another matter: how well the short-term health insurance pay claims for covered services when the claimants do follow all the rules.

House Energy officials contend that they believe "some insurers often avoid paying medical claims when the clam should be rightfully covered under the terms of the contract."

"In a number of complaints the committee reviewed, consumers hired outside counsel to have their claims resolved or filed complaints with the state regulators," officials write. "The refusal of STLDI plans to pay legitimate claims can result in tremendous financial burden for consumers. Consumers who cannot afford to retain legal counsel may have their credit rating negatively impacted and are left thousands of dollars in medical debt. The process to resolve a claim can take many months, and this may affect consumers' credit rating."

House Energy investigators' recommendations

The investigators who worked on the House Energy report did not call for an outright ban on sales of short-term health insurance. They did say Congress, or the states, should:

Limit short-term health insurance policy durations to 90 days.
Impose "all of the ACA's interlocking consumer protections" on short-term health insurance policies.
Keep people from buying more than one short-term health insurance policy in one year.
Keep people from buying short-term health insurance during the ACA individual major medical insurance open enrollment period.
Require short-term health insurance policies be sold only in-person, to avoid aggressive telephone-based marketing tactics.

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Short-term health plans had a great year in 2019

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