The Department of Health and Human Services is on the verge of giving a new ultimatum- Buy Obamacare or go without health insurance. HHS officials announced yesterday that they will be looking to limit the length of short term health insurance to only three months and barring renewal:
Their reasoning is fairly valid (if you don’t actually work with clients on a daily basis). They believe that short term sales are climbing because consumers are choosing to buy the cheaper short term plans over more expensive ACA plans. By their rational, taking thrifty, healthy shoppers out of the health exchange by selling them short term is skewing the risk pool. Theoretically, forcing those healthy consumers to buy ACA plans would help keep premium increases to a minimum because carriers would pay out less in benefits per client.
However, Ideal Concepts' stance is that their proposal seems to be a gross overreaction. Maybe they are unaware of what the majority of short term clients would actually do, which is forgo enrolling in health coverage completely.
As a health insurance marketer that deals with millions of clients, Ideal Concepts is in tune with actual short term consumers, and there are a few key reasons why clients don’t buy ACA coverage:
- They missed Open Enrollment, and they don’t have a qualifying life event to make them eligible for a Special Enrollment Period. This constitutes the majority of our short term clients. They were unaware of enrollment requirements, and now their only option is short term. These clients buy short term coverage temporarily, and now that they are aware, they will be signing up for Obamacare when the next Open Enrollment hits. Limiting short term coverage to 3 months now means these clients will be without coverage for an extended amount of time.
- The cost of Obamacare is too high. HHS is correct, some consumers consider short term because the cost is more reasonable. However, it is an extremely limited group that benefits from short term solely based on cost. Anyone with a medium to high level income won’t consider short term because their penalty is going to be extreme. Anyone with low to medium income is eligible for an Obamacare subsidy. That means the body of people who actually benefit from lower short term costs is minimal. Limiting coverage to just 3 months won’t remedy those clients’ issues, and will most likely push them to drop coverage completely once their 3 months is up.
- They don’t like the Affordable Care Act and refuse to be involved in a public health exchange. This is a limited sector of short term health insurance clients, but a very real one. These clients will also be completely unaffected by this change in ruling- those who feel strongly enough about not being involved in a government exchange will just go without coverage.
- They have a valid reason for temporary coverage. These clients will suffer, because they will now be unable to buy the coverage they need for the time they need it.
By trying to strong-arm consumers into buying the plans that the government wants them to, they are going to cause a lot of individuals to go without health coverage. Isn’t that contradictory to the purpose of the Affordable Care Act?
Ideal Concepts President John Pequeno states, "The impact of the regulation as proposed will have very nominal effects on cost of ACA insurance, likely less than 1%, but will have a massive impact on the availability of insurance to the public, and will in fact cause a higher uninsurable rate, which is counterproductive to the original intention of the law. The intention was not to herd all individuals into a single type of plan necessarily, it was instead to increase the coverage options for consumers, and increase the number of insured individuals. It would seem this proposal by HHS is exceeding their original directive of enforcing the law, and instead looking to change the law based on what it deems to be important, which is herding the public into its plans. I would say that any regulation which will cause a higher level of uninsureds is a misuse of its regulatory power."
HHS is operating under the misconception that short term clients are trying to game the system for monetary reasons, and will switch to Obamacare if forced. They’re also assuming these clients are completely unaware of what they’re buying, aren’t informed about the penalty, and believe they are getting the 10 essential benefits required by ACA plans. This is also a huge misconception- most short term clients are unaware of their options before speaking to a broker, and believe they can buy Obamacare anytime. They are, of course, educated by the broker on the limitations of short term, and the fees and penalties associated with forgoing ACA coverage.
Making short term coverage non-renewable, or limiting coverage to only 6 months are both reasonable requests that would solve the issues HHS is concerned about. About a third of all states have already limited short term coverage to 6 months based on these same concerns.
The HHS proposal to restrict short-term plans is subject to a 60-day public comment. After that, it will be up to lawmakers to determine whether to adopt the proposals, make changes based on public feedback, or abandon it completely. If you’re concerned about how limiting short term health insurance could impact you, be sure to contact your local House or Senate representative and voice your opinion.
Find your local House Representative here: http://www.house.gov/representatives/find/
Find your local Senator here: http://www.senate.gov/senators/contact/