Most people try to avoid reading their health insurance policies — that’s what employers and insurance agents are for. Anyone who plans to buy short-term health insurance, though, will need to read the policy carefully.
The Trump administration recently announced plans to allow consumers to buy short-term health insurance plans that last for up to a year. They are currently capped at 90 days.
Short-term health insurance used to be a niche product, primarily used by healthy people who wanted to have insurance between jobs or for other gaps in coverage. With an increase in the duration of these plans, a growing number of uninsured people might see them as an attractive — meaning less expensive — alternative to other forms of insurance, including plans that comply with the Affordable Care Act. Many won’t understand what they’re buying.
Let me start with the basics. Short-term health insurance plans don’t necessarily cover the essential health benefits — things like emergency services, hospitalization, pregnancy and newborn care, mental health care, and prescription drugs — that are the hallmark of ACA plans. They generally have relatively low monthly premiums but very high deductibles.
I’ve been researching what consumers are likely to encounter when they investigate short-term plans. The first one I came across announced in a huge font its monthly premium of $154.80 per month. Much smaller text listed the massive $12,500 deductible, as well as the $10,000 maximum on coinsurance — the amount of health care expenses individuals are responsible for after reaching their deductible.
We have seen these types of insurance plans before. Between 2 million and 4 million people had plans like this before the Affordable Care Act went into effect in 2010. These were the types of plans that President Obama referred to when he said, “If you like your health care plan, you can keep it.” He was wrong — under the ACA, many individual health insurance plans could not meet the criteria for real coverage.
Back then, Consumer Reports said that these plans were “so riddled with loopholes, limits, exclusions, and gotchas” that they wouldn’t come close to covering expenses if the individuals they covered fell seriously ill. The National Association of Insurance Commissioners, the National Governors Association, and others issued a consumer alert on plans like these. Most people did not know how bad the coverage was because they never needed to use it.
These plans are now coming back, but this time, many of them come with a disclaimer. Here’s an example:
THIS IS NOT QUALIFYING HEALTH COVERAGE (“MINIMUM ESSENTIAL COVERAGE”) THAT SATISFIES THE HEALTH COVERAGE REQUIREMENT OF THE AFFORDABLE CARE ACT.
Is this an adequate warning for the public? No. Many consumers are unlikely to understand that the insurer is really saying, “Be careful: this plan doesn’t cover much.”
The description of another short-term plan’s coverage exclusions — the part where it says the insurance doesn’t cover pre-existing conditions, mental health care, pregnancy, and other conditions — is written at a grade 15 level, the equivalent of a college graduate.
Given the high stakes, the disclaimers, exclusions, and other parts of a short-term insurance plan should be written clearly, and not at a college reading level, because nearly half of Americans have reading skills that are considered basic (meaning grammar school level) or below.
In other words, only a fraction of the people who really need to understand the messages embedded in the fine print of short-term health insurance packages truly do. So they’ll continue, once again, to buy “insurance” that covers little.
This is a sad state of affairs. Essential health information, like the content of a short-term health insurance contract, needs to be understandable by the people reading it. Information like this should be customized for the reader’s education level. For example, health insurers shouldn’t simply provide a hyperlink to the definition of “deductible” in their fine print. They need to explain what it really means in terms that every American can understand.
People who buy high-deductible health insurance should, in theory, be smarter shoppers, since they have more skin in the game. But only 14 percent of people with high-deductible plans check the quality or the cost of a health care service they’re considering. That’s not because they aren’t interested in this information. It’s that we’ve failed to provide them with it in a format they can understand.
For highly educated consumers, some of this information might be considered elementary. That’s why personalization and customization are necessary. We already have techniques, such as the TEACH method, that provide a framework for how to deliver different messages tailored to the comprehension level of different audiences.
If short-term health insurance plans are really what consumers want, then insurers should have no problem making crystal clear exactly what patients get — or don’t get — in exchange for their premiums. And if patients are surprised when the bills start coming in, then the insurer hasn’t done a good enough job explaining its coverage.
Arthur “Tim” Garson Jr., M.D., is director of the Texas Medical Center Health Policy Institute in Houston and past president of the American College of Cardiology.