Even as the Trump Administration to action to make short term major medical (STMM) plans easier to keep, the last insurance company offering STMM plans in Colorado exited the state. The Colorado Commissioner of Insurance made a series of rules and rulings which resulted in the insurers deciding they could not offer these plans without dramatic price increases. This leaves Colorado residents lacking employer or governmental coverage one less option for health insurance.
What’s Wrong with Short Term Major Medical Plans?
Critics of STMM plans will usually focus on incomplete coverage. Unlike plans that comply with the Affordable Care Act (ACA) standards, STMM plans:
· Often exclude or delay benefits for medical costs arising from pre-existing conditions
· Do not cover some benefits considered essential by the ACA (e.g, mental health)
· Impose a benefit ceiling-- an amount past which the insurance company will stop paying for the claim.
As the name suggests, Short Term Major Medical plans are designed to bridge a coverage gap that occurs when a person loses employer or governmental insurance. Critics of ACA plans want to discourage people from having these instead of ACA-compliant plans—particularly past an available open Enrollment period. Thus, the Trump Administration’s decision to allow people to keep plans for up to three years is not viewed favorably by STMM critics.
In Colorado, new rules from the state Division of Insurance operate to dramatically alter the assumptions about scope of coverage insurers had when offering these plans in the state. The agency decided to regulate STMM in the same category as ACA-compliant plans. This includes:
· Limits on how monthly premiums are set (especially prohibiting rating based on health condition or extreme rates for older customers).
· Requiring companies to approve every applicant, even if pre-existing conditions are excluded from their coverage.
· Minimum percentages of payouts for benefits-- Like ACA individual and small group plans, short-term plans must spend at least $0.80 of every dollar collected in premiums on health care claims.
· Coverage of the ACA Essential Health Benefits, including maternity, mental health and prescriptions.
The Coverage Dilemma
Certainly, those of us who help consumers get health insurance, would like there to be an affordable STMM plan that covers everything ACA plans do. Customers come to us looking for insurance, but may not qualify for a Special Enrollment Period (SEP) to get an ACA plan or may simply not be able to afford it.
By regulating STMM plans so heavily, the Colorado Division of Insurance has eliminated this option from the mix. That means a person unable to get an ACA plan midyear or unable to afford a plan at all, is left with indemnity/limited benefit plans or one of the health sharing arrangements.
By squeezing out STMM plans, Colorado has left many consumers with no coverage or less-suitable coverage than even the old-style STMM plans. Is no coverage better than incomplete coverage?