The short-term health insurance plans promoted by President Trump and his administration — and derided by critics as “junk insurance” — spent significantly less than Obamacare-compliant plans on paying out members’ medical claims last year, according to new data from the National Association of Insurance Commissioners.
The Trump administration in 2018 changed an Obama-era rule that limited coverage under cheaper, short-term plans to three months. The new rule allowed those plans — which, unlike Obamacare plans, are not required to cover preexisting medical conditions — to last for up to 364 days and be renewed for up to three years.
The data, highlighted by Modern Healthcare, show that health insurers selling those skimpier plans spent about 62 cents of every dollar in premiums on paying medical claims. The five insurers that earned the most in premiums from such plans spent about 55 cents of every dollar in premiums on claims. Obamacare plans are required to spend at least 80% of premium dollars on claims or rebate the difference to enrollees.
Enrollment surges: Yet as Americans hunt for less costly insurance coverage, enrollment in short-term plans jumped last year, rising from 86,600 at the end of 2018 to 188,000 as of December 31, 2019, Modern Healthcare reports. Insurers collected $248.2 million in short-term plan premiums last year, up from $109.6 million the year before.
Caveats about the numbers: The new data “likely captures just a fraction of the market for short-term, limited-duration health coverage, as these policies often fly under the radar of insurance regulators. The data also reflects enrollment in the plans at a point in time and not over the course of the year, so customers who had a policy but dropped it before then may not be counted,” Modern Healthcare’s Shelby Livingston cautions.
The bottom line: The new data suggest that there is substantial demand for cheaper plans, even though short-term plans “offer weaker coverage with more caveats that allow them to not pay," Justin Giovannelli, project director at the Center on Health Insurance Reforms at Georgetown University, told Modern Healthcare. Experts warn that people signing up for such plans might not realize that they are getting far less comprehensive coverage or may risk having their claims denied or coverage rescinded. Critics also fear that enrollment in such plans, particularly by healthier people, could undermine the Obamacare market by driving up premiums.