Las Vegas Sun

December 15, 2018

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Health experts concerned about risks of limited-duration health plans

People would be able to stay on a type of sub-par temporary health plan longer under a proposed Trump administration rule, sparking a concern that the plans won’t give consumers sufficient coverage.

The proposal would lift the cap on short-term limited duration plans from six months to just under a year to give more options to consumers who cannot afford the rising cost of health care, according to the Department of Health and Human Services and other agencies involved. The plans can be much cheaper, but do not carry Obamacare-required benefits such as coverage for preexisting conditions.

Nevada lawmakers have already codified the six-month limit on these plans into state law, but experts say they still pose risks. A plan that was intended to act as a temporary bridge to full coverage is now being discussed as a year-round alternative, said Nevada Insurance Commissioner Barbara Richardson.

“It wasn’t really set up to do what is now being proposed that it will be doing, and I think that’s the concern,” Richardson said. “The new rule is kind of hinting that you can use it as a substitute for an Affordable Care Act-compliant plan, and it doesn’t have all the benefits of the Affordable Care Act plans themselves.”

These limited plans do not cover the 10 essential health benefits listed by the Affordable Care Act and could leave people with insurance that doesn’t cover what they need, said Heather Korbulic, executive director of the Silver State Health Insurance Exchange. She said the typical exchange plan carries an 8 percent commission for the broker who sells the plan.

Nevada law gives some protection to consumers, Korbulic said, but it is still a critical issue for those who may not know what they’re buying.

“Those are not nearly as generous of benefits as consumers are currently receiving in a qualified health plan,” Korbulic said. “They don’t typically cover maternity, they don’t cover mental health, they oftentimes don’t cover prescription drugs, they have extremely high deductibles.”

Nevada regulators pursued cease and desist orders against several out-of-state companies that sold these plans without state licensing and at a broker commission of 40 percent, Richardson said. A typical short-term plan carries an 18 percent commission for the broker who sells the plan to the consumer, she said.

The companies started doing business in Nevada last year, shortly after premiums spiked by more than 30 percent for people who did not qualify for federal subsidies, Richardson said. She said the state took action against the companies, and it would be inappropriate for her to name them.

“They came in very quickly thinking that this would be an opportunity for them to sell an alternative to the consumers,” Richardson said. “There was a lot of marketing and a lot of push and they were running up the 40 percent commissions in order to get people to move over to them.”

It’s unclear how many consumers bought these plans, Richardson said, though some plans were sold. Regulators got involved after brokers reported the issue, she said.

“We know that there’s still probably a couple floating around out there, because until a consumer’s actually injured, we don’t usually know that they’re there,” she said.

These plans do have their uses, and it’s critical that consumers know what they’re buying, said Las Vegas insurance broker Brian McEvilly of the Clark County Association of Health Underwriters.

“As an insurance broker, I’m a fan of more choice,” said McEvilly, who specializes in health insurance for businesses, individuals, and Medicare seniors.

He said consumers who need insurance outside open enrollment, haven’t lost a job or experienced another qualifying health event, and cannot afford off-exchange plans can pick their deductible in these cheaper, limited benefit health plans.

These deductibles are typically $,2000 to $5,000, McEvilly said, while any care below that, including doctor’s visits and prescriptions, is paid for by the policyholder. Carriers can charge more for diabetes and other preexisting conditions. People waiting for health insurance benefits to kick in at a new job, for example, may buy one of these plans, especially if they may be in an accident.

“If something catastrophic happens, they wouldn’t have to sell their house,” McEvilly said. “That’s the niche here. You have to be very careful.”

The Obama administration capped limited-duration health plans at three months in October 2016. McEvilly said he fielded more requests for these plans before the rule change, and now sees very few.

“In the old days you would literally buy a plan for 90 days or you could do month-to-month for up to 12 months,” he said. “In the first year of Obamacare, there really weren’t the same limitations, and … people were purchasing these en lieu of an Obamacare plan. People weren’t totally understanding what they were buying.”

The new tax law nixed the individual mandate for lack of insurance, but the penalty still applies for people who forego coverage this year and those who buy a limited-duration, limited-benefit plan. The Trump administration did issue new rules expanding exemptions for the penalty. Korbulic said the mandate exists to keep healthy people insured and bring stability to the market.

“The point of the Affordable Care Act, one of them, was to offer this standardized set of benefits that wouldn’t leave anybody out, that everybody would be able to access those benefits,” Korbulic said. “I’m concerned that consumers are going to be sold products that are not actually the right thing for them.”

A public comment period on the proposed rule extending these health plans ends April 27.

McEvilly and Richardson said consumers should look for licensed insurance brokers who can explain their options. People can find licensed companies and brokers through the insurance commission’s website, and can find out if they qualify for an individual mandate exemption for 2018 by contacting the health exchange.