Exploring the phenomenon of increased early insurance terminations

An increasing number of consumers are terminating health coverage within days, weeks or months of buying health insurance online.

I’ve noticed a trend in online health insurance enrollment that seems to be accelerating. I don’t understand it yet; this post is primary a basis to seek additional information.

The observation: The incidence of early termination of benefits is accelerating. In a growing number of cases, the benefits are canceled within days of online enrollment.

Background: I’ve been involved in online health insurance enrollment since the early 1990s an ran a national enrollment service for about a decade. In those early days online insurance enrollees typically relied on professional advice and assistance via telephone that, in my observation, contributed to increased suitability and satisfaction. Today’s health insurance exchange enrollees typically do not use available human advisory services so there is less data available on the motivations, psychology or emotional influences of enrollees on the insurance enrollment process.

Possible explanations:

Lack of consumer information – I’ve long been suspicious that online health insurance enrollees do not have sufficient information to make appropriate decisions. I’ve noticed, for example, confusion between primary coverage and supplemental health insurance.

Confusion with the Affordable Care Act – The Trump administration’s push to promote lower cost insurance with lower level of benefits may be misunderstood by consumers. Consumers may not understand for example, that they may enroll in expensive coverage that covers pre-existing medical conditions without limits OR low cost coverage that limits those benefits, but that they can not enroll in low cost insurance that covers pre-existing medical conditions in the entirety.

General distrust – Formerly an online consumer typically felt they could trust advice from a telephone support. I’m not sure that is true anymore. The wave of ‘fake news’ and propaganda about heat care this year is unprecedented.

Short term use – It is possible that consumers are enrolling for coverage immediately before a schedule doctor visit, for example, and cancelling coverage immediately afterward. I have only  few anecdotal comments to indicate this might be true. No reliable base of information is available. Some commenters speculate this will be accelerated by the cancellation of the health insurance requirement known as the ‘individual mandate’ under the Tax Cuts and Jobs Act.

Solutions: One possibility is to include health insurance advisory services as part of an employer-provided employee benefit plan. Not coincidentally, this is the approach that Freedom Benefits has adopted for 2018.

Another possibility is restoration and expansion of the health insurance navigator program that was established in 2010. This does not seem politically likely under the current political leadership.

A third possibility is to use improvements in technology to screen applicants and communicate on suitability and policyholder satisfaction issues. Our partners are working on these issues that require a greater investment in Artificial Intelligence and technology.

Short term medical insurance covers unexpected medical costs

This users question and the response highlights the use of short term medical insurance and the potential for consumer misunderstanding.

Q:  I am looking for a basic insurance. I am a healthy 64 yrs. and usually go to the Doctor for an annual check up. Pap, Mam., and blood-work. I take five prescriptions, which are not expensive as generics and the use of prescription cards. I will be getting Medicare in about two months. I don’t want to spend over $170.00 a month. Can you advise me on which plan would work best for me?

A: It seems like you are looking for short term medical insurance that covers expected medical costs. Commercial short term medical insurance works exactly the opposite way. It covers unexpected medical costs but excludes expected medical costs. So we would be unable to recommend an insurance that does what you suggest. Coverage for short term expected medical costs is best approached through uninsured benefit programs.

If it would be useful to discuss the longer term expenses that will be covered and not covered under Medicare then this might be a more productive use of your time and budget.

More information about short term medical insurance is available at the Smart Insurance Marketplace.

Insurance for small businesses

Q: Do you offer plans for small business? We are a small business of 3 people. Or can they purchase health insurance through you individually?

A: All of these plans shown in links related to Freedom Benefits are available to small businesses on a list bill basis. The easiest thing is to allow individuals to enroll without entering payment data and then ask us to set up the list bill.

If the business plans to pay for Obamacare-type individual insurance then an additional step is required to set up a Qualified Small Employer Health Reimbursement Arrangement.

Small group major medical coverage may also be available however these are traditionally not purchased through online enrollment services. A local representative may be the best bet.

“One-employee QSEHRA”: a contradiction in terms

The issue of health benefit payments for small businesses became a lot more complicated after implementation of the Affordable Care Act. After all, the law was designed to enforce rigid compliance with health care policy and do away with the liberally designed health plans that varied from one small employer to the next. Since late 2016 we’ve had a range of legislative and administrative actions to undo the harsh effect of the original law. Now we are left with a complicated hodge-podge of rules that can confuse just about anyone.

QSEHRAs are a new type of HRA implemented in 2017 that are specifically designed for an employer with a health plan covering two or more employees since plans covering only one employee are not subject to the reforms and restrictions that the QSEHRA is designed to address. The QSEHRA adds an additional layer of regulation and restrictions to allow an employer to help pay for individual insurance, something that is already always allowed in a one employee health plan,  In short, employers with a one employee health plan have no need for a QSEHRA.

The issue came up today among accountants when the bookkeeper of a small business said that the employer could reimburse only $10,0001 of the health insurance cost of an employee. The bookkeeper was likely referring to the strict excise tax penalties imposed by 4980 of the Internal Revenue Code and the limits of the workaround. Notwithstanding the effect of any administrative action designed to weaken and diminish the impact of these employer penalties, The IRS has already determined that these restrictions and penalties do not apply to one employee health plans2. In this case the use of a Qualified Small Employer Health Reimbursement Arrangement (QSEHRA) 3 is completely unnecessary and only serves to complicate the discussion.

My point is simply this: the QSEHRA was designed to help small employers mitigate the impact of ACA market reforms on small group plans – specifically those related to an employer penalty for paying for individual insurance. Those restrictions do not exist for one employee health plans. So any attempt to use a tool (QSEHRA) to mitigate the effect of the ACA is simply not necessary and only serves to create unnecessary complications and confusion.

While there is no authority specifically prohibiting the use of a use of a QSEHRA in a one employee plan, its use could be viewed by the Service or the courts, if applicable, as an error, It the event that QSEHRA failed to meet the more strict requirements then it seems likely that the plan might still qualifiy as a tradidtional HRA. For example, an employer with a one employee health plan that provided dental benefits would fail to meet the QSEHRA requirements but would still meet the requirements for a traditional HRA.

The conclusion is simple: Don’t use a QSEHRA in one person health plans where a traditional HRA will suffice.


1 The QSEHRA maximum for family coverage is actually $10,250 for 2018.

2 IRS Notice 2015-17: Guidance on the Application of Code § 4980D to Certain Types of Health Coverage Reimbursement Arrangements

3 IRS Notice 2017-67: Qualified Small Employer Health Reimbursement Arrangements

How do Pennsylvanians get their health insurance?

Pennsylvanians get their health coverage one of six ways, according to the Pennsylvania Insurance Department.

  • 27% commercial self-insured
  • 23% Medicaid and CHIP
  • 20% Medicare
  • 14% group insurance
  • 5% small business insurance
  • 5% individual insurance
  • 5.6% are uninsured

Since news coverage focuses primarily on commercial insurance, people are often surprised that commercial insurance plays such a small role in the system, covering only one in four residents. I sometimes notice a sentiment that there is something ‘wrong’ if regular insurance is not an option. That is not the case, based on statewide trends. Commercial insurance does play a larger role in secondary and supplemental insurance.

If you need coverage, then it makes sense to consider both the short-term and permanent coverage options within our heath care system. I am pleased to discuss the options and strategy. For businesses, I am pleased to assist with all aspects of health plan design, selection and enrollment.

 

Q&A about immediate outpatient costs

Many people think they can buy insurance for immediate medical expenses. It doesn’t work that way. But there are still other things to consider. Insurance is mandatory (even if it excludes pre-existing conditions) to gain entry into some treatment programs. It isn’t mentioned in this post but in severe cases Medicaid issues need to be discussed.

Q: Hi, I’m looking for a plan that will help cover some of the cost for an Intensive Outpatient Program at xxxxxxxxx, I start the program on Monday January 8 and I’m looking for an insurance plan that will help with some of the coverage because since I don’t have insurance the program is 125 per day and that’s expensive. Is there any way you could point me to the right direction for a plan to help?

A: Hi xxxxxxxxxx. Sorry you are facing this situation. There is no U.S. insurance available right now that pays for what you are asking so I suggest two things:

1) Be careful of advertising or sales agents who say this is covered

2) Consider whether it is better to have some other insurance rather than none at all. Some facilities will treat patients where the specific procedure is not covered but won’t treat them if they have no insurance at all.

Then next time you have access to open enrollment, you can get covered for these types of expenses. Meanwhile the available insurance plans you are considering do not cover this immediate planned medical expense.

Tony Novak

www.freedombenefits.org

Interesting trends in individual health insurance

This past week the individual health insurance open enrollment period for 2018 closed in 39 states using the federally controlled insurance exchange called Healthcare.gov.  We think that the trends favor growth in services like Freedom Benefits. The U.S. Department of Health and Human Services is charged with reporting on the results of that enrollment period. Associated Press dug into the enrollment data further and published some surprise results. Taken together with other previously released information, these are the trends in individual health insurance:

Overall, enrollment was unexpectedly strong considering the actions that factions of the federal government took to sabotage its own program. Without enrollment support, without advertising and with a short enrollment period almost 9 million signed up for coverage.

This insurance exchange is exclusively for working people with a suitable income. In most states, those who do not meet minimum earnings levels are not allowed to enroll through Healthcare.gov but instead are referred to state Medicaid programs.

Most applicants (about 4 out of 5) qualify for a reduced premium based on their earnings that keeps their total expense at or below 16% of household income.

The total enrolled is far less than the projections made by the Department of Human Services before the Trump administration took actions to sabotage the insurance program.

The Trump administration shortened the enrollment period and cut off advertising funding so that fewer people would sign up for their benefits. The strategy worked to some extent. Fewer people enrolled for health insurance in 2018.

Most Healthcare.gov enrollees (about 7.3 million of the total 8.8 million enrolled) live in rural working class areas that voted for Trump and Republicans in 2016. Political observers predict that the government’s efforts to cut the health benefits of the working class will hurt their chances in future elections.

Yesterday President Trump said that he hopes and expects that his party’s success in eliminating the tax penalty known as the ‘individual mandate’ will ultimately result in a collapse of these federally funded health benefits for working-class Americans.

The number of people in the U.S. without health insurance is rising again. This was the impetus that pushed us into health care reform from the 1960s through 2010.  It’s difficult to believe that the problem will fester for another 50 years before the government takes action again.


The takeaways that are important for us at Freedom Benefits:

There is opportunity for year-round enrollment outside of the exchange open enrollment period.

The elimination of the individual mandate penalty means that it is no longer important that insurance meet federal legal requirements. Consumers are free to pick the insurance they want.

There will be demand for the lower priced insurance called skinny plans, short term medical, supplemental plans and limited benefit medical insurance.

The Trump executive order to promote the sale of insurance across state lines means that citizens in locations without low priced insurance may soon have other options.


I predict that most of the individual health insurance market will return to the private sector enrollment within a year.

ID cards not issued to dependents

I received this question from a health plan member today regarding ID cards for covered dependents. The information may be worth sharing because this is a common question:

MEMBER QUESTION:  I got two I.D card both have my name, i want to ask where is my daughter’s I.D card

MY RESPONSE: I am responding as the independent adviser and not as a representative of your insurance company.

To the best of my knowledge, ID cards are always issued in the name of the policyholder. I am not aware of any legal authority which allows and insurance company to issue an ID card in the name of a covered dependent. Duplicate ID cards may be issued and these may, include the names of covered dependents. The actual content of printing on the ID card varies among plan administrators.

For more information, you may wish to contact the members services office by telephone as listed on your insurance ID card.


The point is that:

  1. ID cards are typically not issued in the names of dependents.
  2. Some, but not all, health plan administrators list the names of covered dependents of the card.
  3. ID card printing and issuance practices vary between insurers but this practice of issuing cards only to the policyholder is consistent.

User Q&A: Insurance for doctors visits

This type of question highlights an issue that has risen to near crisis level lately apparently because of the combination of: 1) people with low levels of information look for cheaper coverage, 2) The lack of doctor visit coverage in high deductible Obamacare policies, 3) misleading sales practices of health insurance by boiler room telephone call centers, 4) an increase in skinny policies and the number of inexperienced agents selling them.


Q: “CAN I GO TO A FAMILY DR OR PRIMARY DR FOR VISIT, I HAVE A LOT OF MEDICAL PROBLEMS”*

A: It sounds like you need a policy that provides a payment for doctor visits without a large deductible.  Some of the health insurance plans you looked at provide that, others do not. Please pay attention to the coverage and limitations that are printed in the summary of coverage. If you want, we can arrange for an enrollment agent to call you to discuss and explain it further.

*I reproduced the question exactly as it came to me in this format and wording that seem to indicate a consumer lacking sophistication for buying insurance.

Caution about ‘skinny’ health plans

NBC News published a detailed investigative report on “skinny health plans” this past week. Their conclusion is that consumers are confused about health insurance and that the Trump administration is adding to the confusion. As a guy who has handled more than 50,000 consumer communications about health insurance over many years, I agree with the published report’s analysis and conclusion. Yet this this consumer confusion existed back in the years before the Affordable Care Act so we can’t blame it all on Trump just because he has pushed the ‘skinny’ health insurance approach by executive order.

I tend to react furiously to false advertisement claims by health insurance marketers, often untrained telephone sales boiler rooms that notoriously mislead consumers. Recent claims that insurance plans are “ACA compliant” or “promoted by President Trump” are the most confusing to consumers lately.

Yet these alternate health plans do have their place in the market. Whether we call them “skinny health plans”, “short term medical insurance”, “limited benefit health insurance” or “core health insurance”, my position has always been that some coverage is better than none at all.

Most people who pay for their own insurance are not adequately covered by any single health insurance  plan, including the ACA health insurance policies. Whether an ACA plan or another plan works better for a normally healthy person is a function of the type of medical bills they will incur in the future; something we can seldom predict in advance.

In a perfect world, we would be covered by a government-influenced basic coverage and a supplemental policy through our employer or purchased individually. Although we are far from a perfect world, Freedom Benefits can help small business employers redesign their health plans to maximize the benefits to employees that are offered through a combination of public and private health plans.