Short term health insurance….A horse (of course) or Mr. Ed?

It looks like a horse. It smells like a horse. It rides like a horse. It must be a horse, right? Well, maybe, unless it’s the Famous Mr. Ed. For those of you too young to remember, Mr. Ed was a talking horse who could only be heard by his owner, and was a bit of a troublemaker. He looked like a horse, but he didn’t behave like one.

I found myself thinking about him when I saw this sign posted at an intersection a few weeks ago. Health insurance is health insurance is health insurance, right? Not if you were Melissa.*

Melissa got the renewal notice for her individual health insurance policy. She was stunned when she saw what she was going to have to pay each month. She called her insurance broker who suggested she could buy a different insurance policy that would cost a lot less, have no deductible, and allow her to see any doctor she wanted.  Just like the sign I saw. It sounded like a good deal to her, and it was literally hundreds of dollars less a month. She had to complete a health history, but otherwise didn’t have to do anything but sign on the dotted line and pay the bill each month.

Three months later, she woke up with chest pain and went to the ER. She was having a heart attack and thankfully got there in time. She left the hospital with no damage to her heart, but with bills in the mid 5 figures. The hospital filed the bills to her insurance.

Imagine her surprise when she got the letter that said her care wasn’t covered? How could this be?

When the Affordable Care Act (sometimes referred to as Obamacare) passed in 2011 there were several provisions that changed the landscape of health insurance significantly. Two of those provisions provided some protections to consumers that could be really important to you.

The first is that you can’t be denied coverage if you have a pre-existing condition. The monthly premium can only be based on your age, your sex, and whether you smoke…attributes that can be applied easily to anyone. Many people, especially those who had health conditions and would have been denied health insurance altogether before the ACA were now eligible for coverage.

The second was that ACA-compliant policies had to have limits on what you could potentially pay out of pocket. The bronze, silver, and gold designations help communicate how much you could be responsible for each year, with bronze having the biggest out of pocket expenses, and gold the lowest. (Conversely you pay less per month for a bronze policy and more per month for a gold policy). For ACA-compliant policies, so long as you get care from an in network provider, the provider has to accept the insurance payment as payment in full.  So as a consumer, your total financial risk each year has a defined limit. Easier for financial planning.

Plans like Melissa bought are sometimes referred to as short term health insurance plans, and they don’t have to comply with the ACA requirements. The monthly premium payments for these plans are considerably less than they are for an ACA-compliant plan. Like Melissa, you might think this sounds like a good deal. But is it?

The details are always in the fine print.

1) Short term health insurance plans exclude pre-existing conditions. Now to you and me, if a condition wasn’t apparent at the time you buy the policy, it isn’t pre-existing. She wasn’t having a heart attack when she bought her plan. Other than high cholesterol, for which she was taking medication, she’d had no indication whatsoever that she had heart disease. However, Melissa’s plan argued that because she had a risk factor and heart disease doesn’t develop overnight It was pre-existing. Therefore they had no legal obligation to pay on bills for a heart attack.

AND

2) Based on what the doctor or hospital charges, short term health plans reimburse you from a fee schedule. Because the doctor or hospital doesn’t have a contract with the insurer, they aren’t required to accept the insurance payment as payment in full. You are still on the hook for the entire amount they billed you regardless of what the short term policy pays.

Virtually no one pays the “billed” amount that hospitals and doctors charge, except patients without insurance. Or now, patients with short term health insurance policies. Hospitals and doctors can and do balance bill patients with these policies. This isn’t critical for an urgent care visit, but it can be a terrifying exposure for hospital care.

So what happened to Melissa? Her policy didn’t reimburse her a cent for her care. The hospital and doctors agreed to a small reduction in the fees they charged based on the fee schedule from her plan, but she walked away owing $30,000 bill and a ding on her credit while she paid the bill over 5 years.

Why are these policies so much less expensive than ACA-compliant policies? Essentially because they can and do deny payment for care for pre-existing conditions (and they get to define what constitutes “pre-existing”), and they don’t negotiate fees with providers. BTW, if you “follow the money,”  insurance sales people often get larger commissions for selling short term plans than they get for selling ACA-compliant plans (if they get a commission at all for selling them.)

Insurance of any kind doesn’t make risk go away; it’s a tool to help make risk bearable. At some point in our lives we all will need healthcare, although that likelihood increases with age. Short term insurance policies are described as a way for healthy consumers to not have to pay ACA-compliant policy premiums. In fact, for some healthy (and lucky) consumers these policies can and do result in lower out of pocket costs for their healthcare. But the issue is how you’ll manage if you need insurance that looks and acts like insurance, and doesn’t cause trouble like Mr. Ed.

If you’re unsure about what kind of health insurance might be best for you, call us before you sign on the dotted line. We can help.

*Name and some details changed to protect patient confidentiality.

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