Short-term health plans spent little on medical care

MOST SHORT-TERM health plans in 2018 didn’t come close to paying claims at Obamacare-required rates.

For every dollar in premiums that United-Healthcare collected from people enrolled in a short-term plan last year, it spent less than 40 cents on patients’ medical claims.

Cambia Health Solutions, which operates Blues plans in four states and sells short-term plans through its LifeMap subsidiary, spent even less on medical care for those plans, paying out just 9 cents for every dollar in premiums.

These low “loss ratios”—which show the percentage of premiums spent on medical claims and were published recently in the National Association of Insurance Commissioners’ 2018 Accident and Health Policy Experience Report— are a stark reminder that short-term plans benefit insurance companies more than the patients who purchase them. The data bring into question what kind of value people receive from a short-term health plan, insurance experts said. The Trump administration expanded access to such plans last year.

“Compared to comprehensive plans that have to comply with the ACA’s rules, short-term plans’ coverage limitations often result in carriers paying out far fewer claims, or paying pennies on the dollar,” said Rachel Schwab, a research associate at Georgetown University’s Center on Health Insurance Reforms.

In a statement, Cambia said that the MLR reported by the NAIC was not representative of its business because of differences between claims incurred. The actual rate, it says, is 32%, which is still the lowest of plans reported on.

The average loss ratio of the five insurers that bring in the most premiums from short-term insurance policies was 39.2% in 2018. That means that 39 cents of every $1 collected in premiums was spent on medical care, while the rest was spent on administrative expenses or kept as profit. In contrast, the average loss ratio among comprehensive major medical plans purchased by individuals in 2018 was about 73%, according to the NAIC report. ACA-compliant plans must meet a minimum medical-loss ratio of at least 80% or else pay rebates to enrollees, while short-term plans are not subject to such a minimum requirement.

The loss ratio for UnitedHealthcare, the leader in the short-term plan market, decreased each year to 37.3% from 50.9% in 2016, according to the NAIC annual reports. Over the same period, the company, which sells short-term plans through its Golden Rule Insurance unit, has grown its premiums from those plans from $26.5 million to $41.7 million, up 57%.

UnitedHealthcare said in response to a question about why its loss ratio is decreasing: “These policies are not right for everyone and we work to ensure consumers have the information they need to make the right decision based on their circumstances.” A company spokeswoman added in an email that loss ratios can vary significantly year to year because of the shorter plan duration and changes in who buys the plans.

According to the NAIC’s latest report, about 86,600 people enrolled in shortterm plans in 2018, but that figure likely doesn’t capture the entire market since many short-term plans are being sold through out-of-state associations exempt from regulation.

The CMS expected about 600,000 additional people to enroll in short-term plans in 2019, with that figure reaching 1.6 million people by 2021 or 2022. ●