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The High Cost of Cheap Health Insurance - Consumer Reports
The High Cost of Cheap Health Insurance - Consumer Reports
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By Lisa L. Gill
February 13, 2021
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Photo: iStock
In response to the ongoing COVID-19 crisis, President Joe Biden recently signed
an executive order reopening enrollment in Affordable Care Act insurance plans
for three months starting Feb. 15.
But if you are shopping for a new plan, beware: In your search, you may come
across ads for “short term” health insurance plans that can seem tempting, with
surprisingly low premiums, but that may cost more in the long run by providing
skimpy coverage when you need it most.
“If you get sick, short-term health insurance plans may pay little or nothing to
cover your actual medical needs, and they can sharply raise your rates or drop
you entirely,” says Chuck Bell, who has followed the health insurance industry at
Consumer Reports for more than 20 years. He notes that while the plans have
been around for a while, the Trump administration extended the period they
could cover from just three months to a full year. "Even if you stay well, these
plans typically offer scant coverage and may entirely exclude even basic services
like prescription drugs or immunizations.”
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uide to Health That report detailed more than a dozen business practices
nce
—such as dropped coverage, limitations for lifesaving
procedures, and poor protections during an emergency—
that can jeopardize the financial and physical health of people enrolled in the
plans.
You won’t find these plans on Healthcare.gov—the main portal for Affordable
Care Act health insurance. Rather, you have to buy them from an insurance
broker, who is incentivized with commissions as much as 10 times higher than
what they get for selling ACA plans, according to the congressional report. It also
says brokers may not explain to consumers the full coverage details or offer
alternatives.
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“Short-term plans are options that may work for some Americans to bridge gaps
between major medical plans,” says Kristine Grow, a spokesperson for the
America’s Health Insurance Plans, an industry group. But, she says, “They
should not be considered a long-term replacement for comprehensive
coverage.”
Marketers of the plans say they give people cheaper alternatives, and the low
rates can be attractive, Pollitz says. A November 2019 analysis by eHealth, an
online health insurance broker, found that the monthly premiums on short-term
plans were, on average, 80 percent less than the premiums for ACA plans. For
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example, eHealth found that the monthly premium for a family of three in one
of the lowest-cost ACA plans without a federal subsidy came in around $862; for
a short-term plan, the monthly premium was $116.
But eHealth found that for people who do qualify for a federal subsidy, the
premium for an ACA plan was $297—still more than for a short-term plan but
much less than a long-term plan without the federal subsidy.
Short-Term Shortcomings
Even when people do save substantially with a short-term plan, the trade-off
might not be worth it.
“One of the biggest concerns with short-term plans is that they look and feel like
a regular plan when they are not,” says Emily Curran, a researcher at the Center
on Health Insurance Reforms at Georgetown University.
For example, these plans often don’t offer the ACA-mandated “essential
benefits” (PDF), including wellness services, immunizations, and adequate
catastrophic or emergency care coverage. And there is no limit on deductibles,
often requiring consumers to pay many thousands of dollars before coverage
begins. For example, one consumer was reported in the congressional
investigation to have a $5,000 deductible—which renewed each quarter.
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for routine pelvic exams or need birth control may find that their plans don’t
cover those services. Some of the companies the congressional report reviewed
provide no coverage for maternity and newborn care.
What’s more, women who become pregnant while covered by a short-term plan
may be subject to intrusive fact finding.
The June 2020 congressional report cites the case of a woman who discovered
she was pregnant days after her application for short-term health insurance was
accepted. The insurer, BCI, denied the related claims she submitted, calling the
pregnancy a “preexisting condition.”
To prove it wasn’t, the woman said in a complaint that she was forced to explain
that she’d had a normal period just two days prior to the application being filled
out and that “I had no way of knowing [I was pregnant] until there was enough
pregnancy hormone in my system to show a positive reading.”
And whereas ACA plans also do not set prices based on gender, the House
investigation found that short-terms plans charged women up to 50 percent
more than men for the same coverage, with one plan charging women ages 30
to 34 up to twice as much as men.
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In November 2018, just a few weeks before signing up for a short-term plan,
Perry McGuire of Pinal County, Ariz., was found during a routine screening test
to have an elevated prostate specific antigen (PSA) level, a possible indicator of
prostate cancer, and a possible nodule on his prostate gland, according to
allegations made in an October 2020 lawsuit he brought against the insurance
company, Golden Rule.
Two months later, after his coverage had begun, McGuire was diagnosed with
the disease and required surgery, the suit alleges, but Golden Rule refused to
cover any of those charges, and rescinded his coverage all together, claiming his
prostate cancer was a preexisting condition. Ultimately, McGuire’s treatment
bills grew to more than $265,000, he alleges. The lawsuit is ongoing.
Coverage problems could also extend to people with COVID-19. “If a consumer
was infected with COVID-19 or experienced symptoms prior to enrolling in a
short-term plan, the illness could be considered a preexisting condition and the
plan could deny coverage,” says Curran at Georgetown.
By contrast, plans offered through the ACA cannot deny you coverage for having
a preexisting condition of any kind, including COVID-19, or deny claims related
to them, Pollitz says.
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What to Do Instead
If you’re looking for affordable health insurance, experts suggest that instead of
turning to a short-term plan you consider these steps:
See if you qualify for Medicaid. In 36 states and the District of Columbia,
Medicaid was expanded to cover more people who’ve lost health insurance. And
despite its reputation, coverage with Medicaid is far broader and more generous
than short-term plans.
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income, every state’s Medicaid program will cover you, says Pollitz at the KFF.
Contact your state’s Medicaid office for information on how to enroll.
Find out whether you’re eligible for a subsidized ACA plan. You can do this
at Healthcare.gov. Individuals who earn up to $51,040, or families of four with
incomes up to $104,800, can get reduced rates. Most people receive some sort
of subsidy, with the average monthly premium running about $87.
If you already have an ACA plan, and you or someone in your household lost
income this year, you may qualify for a larger subsidy. Check with
Healthcare.gov.
Signing up there has another benefit: If you’re ineligible for a subsidy now but
your financial circumstances change during the year and you become eligible,
you’ll be able to get money back on your tax return, says Christen Linke Young,
deputy director of the Domestic Policy Council for Health and Veterans at the
Brookings Institution.
See if your state runs its own marketplace. Some states, including California,
Massachusetts, and New York, offer insurance with federal subsidies to lower
the premium. See whether your state is one and find provider contact
information.
Consider COBRA. If you were employed in a business with more than 20 full-
time employees, you may be able to continue your health coverage, though you
will have to pay for it in full. You have 60 days after losing your job to decide.
This can be a good option if you have complex health conditions or need
ongoing treatment.
Consider a federally funded health clinic or charity care. While this is not a
substitute for having health insurance, know that in many cases you needn’t
forgo necessary medical care if you are not insured.
There are more than a thousand federally funded and charity medical centers
throughout the U.S., some of which have on-site pharmacies where you can fill
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If you’re looking for a low-cost way to cover your healthcare costs, you may come across
something called a Healthcare Sharing Ministry (HCSM).
About a million people in the U.S. belong to one of these groups, in which healthcare costs are
shared among people with common religious or ethical beliefs, according to a report by the
Commonwealth Fund. Each member is charged a monthly fee, with monies redistributed to pay
for other members’ medical expenses.
While membership isn’t exactly cheap—they can run several hundred dollars a month for a
couple, according to figures from Samaritan Ministries, one of the largest HCSM providers—that
may still be lower than the monthly premiums on an unsubsidized ACA plan.
The problem, though, is that while the groups use the language and structure of health insurance
—including terms like deductibles, monthly premiums, networks, and copayments—HCSMs are
not health insurance and do not guarantee payments for a member's medical claims. This is
something that can catch consumers who are unaware, according to the Commonwealth Fund.
That means the HCSM can refuse to cover your bills, leaving you stuck with them.
For example, George Kelly, of Neosho, Miss., says he signed up for coverage with an HCSM called
Trinity Healthshare in 2018 and allegedly wound up owing a total of about $2,000 in medical
expenses due to unpaid claims for routine care, according to a class-action lawsuit brought
against the company in June 2020. The lawsuit also alleges that Trinity Healthshare refused to
cover needed hernia surgery at his local hospital, so he had to cover the full $3,000 cost out of
pocket.
Kelly told CR that he and his wife were surprised. “That's why we signed up, to have our local
doctors and nurses and hospitals all in the network,” he says.
Instead, Kelly, who runs his own landscaping business, says he had to drive 3 hours to Oklahoma
City and spend two nights in a hotel so he could work with a medical group that offered lower-
cost treatments for people paying entirely out of pocket.
An attorney for Trinity Healthshare, since renamed Sharity Ministries, declined to comment directly
on Kelly's claims, given that the litigation is ongoing, but said the vast majority of its customers
continue to be satisfied and see Sharity Ministries as a "cost-effective medical payment
arrangement."
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Lisa L. Gill
As a dorky kid, I spent many a Saturday at the Bloomington, Ind., public library, scouring
Consumer Reports back issues for great deals. Now, as a (much) bigger kid, that's still my job!
Identifying products and services, especially in healthcare, that are safe, effective, and affordable
—and highlighting those that aren't—is my top concern. Got a tip? Follow me on Twitter (
@Lisa_L_Gill)
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