HealthMarkets, a national insurance agency, reported short-term policy sales were up 150 percent in 2015 compared to 2013. But what is driving consumers to seek more limited, alternative health coverage with features largely banned by the Affordable Care Act?
Short-term health insurance is typically sold to help consumers shore up gaps in coverage. The plans do not cover pre-existing conditions for members, a limitation that is banned on ACA markets. In 2016, consumers who lack coverage that meets ACA standards face fees of $695 per adult, or 2.5 percent of their household income.
Below are five things to know about the trend for short-term health insurance, according to Wall Street Journal.
1. Price is the leading factor causing the uptick in the use of short-term health policies. Limited, short-term coverage keeps premiums down. A survey by eHealth this year found 51 percent of short-term policy holders said price was their main reason for buying alternative plans, versus 39 percent who said they only needed temporary coverage.
2. Some consumers still save money with short-term plans even when they add in the federal penalties for not having an ACA compliant plan. Robin Herman, a 34-year-old mother, told Wall Street Journal that the monthly cost of her short-term coverage, plus the cost for conventional ACA-compliant plans for her two children, is one-quarter of what she would have paid for ACA plans covering all three of them. "This is saving me a ton of money for the year," Ms. Herman told WSJ, even when she adds in the federal penalty for not having an ACA plan herself.
3. The convenience of being able to purchase short-term policies year round may also be a contributing factor to their increasing popularity. ACA plan enrollment is typically limited to an enrollment window, which some consumers may be unable to meet for a variety of reasons.
4. Short-term policies may be more appealing to some consumers because they offer broader network coverage. Many insurance companies that offer plans on the ACA exchanges have narrowed their network coverage options as a way to keep down costs. A recent promotional email to insurance brokers from UnitedHealth Group touted its short-term policy's broad access to physicians, compared to more limited networks found in other medical plans, according to Wall Street Journal.
5. Insurance brokers are incentivized to sell short-term plans. Because short-term policies have higher profit margins for insurers than ACA plans, insurers often pay agents commissions on short-term policy sales.