In a study published by the National Association of Insurance Commissioners’ 2018 Accident and Health Policy Experience, health insurance companies spend less on the dollar for their short-term health plans. These short-term health plans were recently given more access to by the Trump Administration last year. Compared to more extensive health plans offered on the health insurance markets that have to comply with the Affordable Care Act’s rules, short-term health plans are not mandated to cover medical care as extensively as other plans. These short-term health plans also are not required to cover pre-existing conditions and are able to charge more based on an enrollee’s health status. Also, they are not mandated to cover essential health care, such as prescription drugs and maternity care.
These short-term health plans are a low loss ratio, which have less losses in comparison to gains,and spend less on medical care, which question how much value enrollees are actually receiving from these short-term health plans. To put the low loss ratios into perspective, the average loss ration of comprehensive major medical insurance plans are 72.57%, and most short-term health plans are falling way below this average, with the lowest coming from Cambia Health Solutions, reporting 9.34% of premiums spent of patient’s medical claims.
In the published study, the average loss ration of the five health insurers that collect the most premiums was 39.2% in 2018. So on average, these short-term health plans about $0.39 from over $1 of collected premiums. The rest of the percentage of the premiums will be used for expenses or profits.
Affordable Care Act plans are required to meet a medical-loss ration of at least a minimum of 80%. If not, these ACA compliant plans would have to pay back money to enrollees as a rebate. Short-term health plans are not required to meet the medical loss requirement. According to the National Association of Insurance Commissioners report, almost 86,000 people enrolled in short-term health plans in 2018. For 2019, the Centers for Medicare and Medicaid services estimates an additional 600,000 people will enroll in short-term health plans.
Read the original article from Modern Healthcare here.