The Potential Employer Impact of Expanding Short-Term Health Insurance
July 03, 2018
If you blinked on February 20 of this year, you may have missed that the Centers for Medicare and Medicaid Services (CMS) issued a proposed rule to loosen restrictions on consumers’ ability to obtain short-term health insurance for up to 364 days. Now, well past the 60-day public comment period, recent news indicates CMS is preparing the final rule for short-term health insurance plans.
What exactly are short-term health insurance plans? Generally, these plans are for health care consumers who need coverage during coverage gaps, for example, when an individual is between jobs. Since these plans don’t meet minimum essential coverage requirements under the Affordable Care Act, they are usually less expensive than most plans. Insurers offering these plans can decline to cover a consumer’s pre-existing condition, offer the plan with a very high deductible and out-of-pocket maximum, set a maximum on lifetime coverage, and exclude coverage for certain essential benefits altogether. As a result, these plans can be much more affordable for consumers who just want basic coverage for a short time. The prior Administration capped coverage under these plans at 90 days, but that will soon change.
Similar to how the Tax Cuts and Jobs Act of 2017 will result in more uninsured individuals because consumers will no longer have to pay a penalty for not having health care coverage, the ensuing rule to loosen restrictions on short-term health insurance could result in more under-insured individuals. Covered California, a CPR member, commissioned PwC to evaluate the impact of the rising number of uninsured individuals on the California market. PwC’s analysis indicates that for every additional uninsured person, California hospitals would provide $1,000 of uncompensated care. Further, PwC projected the rise in uncompensated care would result in a 2-4% premium increase for employers, which employers would be likely to share with their employees. With more individuals enrolled in short-term health insurance, it’s possible that hospitals would provide more uncompensated care, resulting in an additional premium increase for employers. Not a great scenario for either employers or their employees.
While this is only one study, it gives heads up to employers that these broader marketplace changes may impact your organization as you seek ways to get the best bang for your health care dollar. Employers, we’ll be watching to see if these changes impact your 2019 rates. Let us know!