For many Americans, the news that 2019 may be a year of health insurance market stabilization comes as welcome relief. In contrast to the tumult of the past several years with skyrocketing premium increases, mandatory tax penalties for not purchasing Affordable Care Act (ACA)-compliant health insurance, tightened restrictions on non-ACA compliant insurance products, and a steady exit of insurers from the ACA marketplace exchanges, the forecast for 2019 indicates fewer market fluctuations, and the chance to consider different choices for health insurance coverage without penalty.
Short Term Health Insurance Gains Momentum as Alternative Coverage Solution
In a move to make less costly health insurance options more accessible for individuals searching for coverage alternatives to ACA-compliant plans, the federal government has repealed length-of-coverage duration regulations that were implemented during the Obama administration. Previous rules limited short term health insurance policies to 90-days, but the new regulations, effective October 2, 2018, enable individuals to select coverage that lasts up to 364 days. Insurers now also have the option to allow individuals to reapply for short term health insurance coverage for up to 36 months.
Advantages of temporary, short term health insurance
These new regulations make short term medical insurance an increasingly feasible coverage solution for individuals until they are able to find more a more permanent insurance option. Short term health insurance also offers advantages such as:
Young, healthy individuals who do not qualify for a financial tax subsidy to purchase insurance usually find short term health insurance to be much more affordable than marketplace exchange coverage. Because short term health insurance plans do not comply with ACA regulations, insurers are able to ask applicants to answer medical history questions and then approve coverage based on health factors. By choosing to cover individuals who have few medical conditions, insurers can set lower prices for the short term health insurance plans they offer.
Coverage for emergency medical situations
Short term health insurance is designed to provide health insurance coverage and financial protection for emergency care required to treat unexpected illness or injuries. Although short term health insurance policies typically don’t cover preventive or maternity care, many plans do offer convenient features such as the option to add prescription benefits; choice of coinsurance, deductible and copayment amounts; and even access to telemedicine services where you can chat with a doctor online to receive a diagnosis, rather than having to spend time traveling and then waiting at a provider’s office.
Another advantage to short term health insurance is the ability to begin and end coverage when it suits your schedule. Rather than having to wait a month for coverage to become effective – as is often the case with marketplace exchange plans – with a short term health insurance policy you can select a start date within 24 hours of being approved for coverage. Further, you can cancel coverage at any time without paying a penalty.
States Respond to Federal Government’s Regulation Changes
Although the current administration has loosened regulations on alternative health insurance coverage solutions, some states currently have, or are considering enacting, legislation that counteracts the federal rules. California and Hawaii are essentially prohibiting the sale of short term health insurance products, joining five other states (Massachusetts, New Jersey, New York, Rhode Island and Vermont) that either ban the plans, or have enacted regulations making them unappealing for insurers to offer. The state of Washington is currently considering legislation which would limit short term health insurance to a three-month coverage duration with no renewals, and further prohibit insurers from selling short-term plans during open enrollment for the following year, as well as selling to anyone who already had three months of short term health insurance coverage in the prior 12 months.
Residents of the following states have the ability to purchase short term health insurance plans, but should be aware that their states have legislation with short term health insurance plan restrictions, which remain in effect despite the new federal regulations:
|States With Short Term Health Insurance Plan Restrictions|
|Arizona||Up to 180-days are allowed with one renewal during a 12-month period. To purchase on Pivot Health, select “More than 180 Days” and then “Most Affordable”.|
|Colorado||Six months or less.|
|Connecticut||Must include coverage for essential health benefits, must last no more than six months, and be non-renewable.|
|Indiana||Six months allowed with 1 reapply.|
|Maryland||Three-month coverage duration with no renewals.|
|Missouri||Six months are allowed with reapply.|
|New Hampshire||Six months or less|
|North Dakota||185 days are allowed with 1 reapply. Then there must be a 30-day break before reapplying again.|
|South Dakota||Six months or less|
On the other hand, states such as Minnesota are considering legislation that will expand access to short term health insurance plans. Although these states have not yet successfully passed new regulations, it may be a harbinger of a movement towards states acknowledging that this type of health insurance product may serve as a product that meets the needs of some of its residents.
Federal Individual Mandate Repealed
The Congressional repeal of the federal individual mandate – eliminating the tax penalty for individuals who do not purchase ACA-compliant health insurance – becomes effective January 1, 2019, resulting in savings for individuals who choose not to purchase marketplace exchange coverage. The federal Department of Health and Human Services (HHS) estimates that 500,000 people will exit the exchange markets to purchase short term health insurance or another alternative, as a result of the repeal. In addition, the HHS predicts another 100,000 individuals who are currently uninsured will enroll in short term health insurance starting in 2019. These estimates are in line with a number of analyses which estimate that by 2022, 1.9 million individuals will be enrolled in short term health insurance plans, and will have left the exchange markets.
Critics of the repeal have expressed concerns that with healthy individuals exiting the exchange markets, the remaining pool of exchange plan enrollees will be sicker and have higher claim costs. In turn, this may conceivably lead to higher premiums for those remaining in exchange plans. Prompted by such concerns, a handful of states have chosen to impose their own mandates requiring residents to purchase health insurance, similar to the mandate which has been in effect in Massachusetts since 2006. New Jersey and Washington, D.C., both have individual mandates which take effect January 1, 2019; Vermont’s new mandate becomes effective in 2020, with details yet to be finalized on enforcing the mandate. More states could follow. Most states, however, do not have individual mandates in effect, enabling consumers to pursue health insurance options that best meet their coverage needs and budget.
Stabilization of Exchange Marketplace Plan Premiums
The good news for millions of individuals enrolled in ACA plans is that most will see only slightly higher premium rates in 2019, and some consumers will even see their premium rates decrease. On average, rates will increase by 3.6 percent across the nation, with only six states and Washington, D.C., experiencing premium adjustments between 10 and 18 percent.
Past premium adjustments have helped insurers recoup initial losses
One of the factors helping stabilize premium adjustments, say industry analysts, is that the sizeable premium rate hikes of the past several years have enabled insurers to return to profitability after they experienced substantial losses during the first few years they offered exchange plans. In addition, a better insured population management and clearer insights into claims experience are helping insurance companies determine appropriate pricing for their plans.
Marketplace insurers remain in place
Another reason for premium stabilization is that insurers are starting to return to the exchange marketplace. In 2019, nineteen states will either have new insurers enter the exchanges, or have current insurers expand into additional locations. Not a single county in the entire country will lack an insurer option.
States pursue reinsurance program options and aggressive enrollment outreach
States’ efforts to stabilize the market are also playing a key role in the changing market conditions. Section 1332 of the Affordable Care Act allows states to apply for State Innovation Waivers, offering the opportunity to develop programs that will provide state residents with high quality, affordable health insurance while retaining the fundamentals of the ACA legislation. One such initiative that a number of states have created, or are currently developing, is a state reinsurance program.
Reinsurance programs have launched in states with Democrat governors, as well as states with Republican governors. By covering higher-than-average claims with state dollars, states are reducing the overall risk to insurers, encouraging them to stay in the market and offer lower premiums for the average consumer.
Alaska, Maine, Oregon and Wisconsin have approved reinsurance programs in place with remarkable results – for 2019, Maine anticipates a 9 percent premium rate decrease, and Wisconsin predicts an 11 percent premium drop. Hawaii, Indiana, Louisiana and Ohio are either investigating or currently developing programs, while Maryland and New Jersey have developed programs and are awaiting approval by the Centers for Medicare and Medicaid Services (CMS) to implement in 2019.
Additionally, some states have developed comprehensive outreach and marketing programs to enroll individuals in their exchange marketplace. California credits its promotional efforts with lowering premiums by 6-8 percent.
Congressional moratorium on health insurance tax continues in 2019
Finally, another component in the stabilization of the health insurance market premiums is the moratorium that Congress passed in 2018, so that insurers would not have to pay the Health Insurance Tax (HIT) in 2019. Part of the ACA legislation, the HIT is an annual fee all insurers who offer fully insured health insurance plans must pay, to help fund the federal and state marketplace exchanges. Each insurer’s HIT is calculated based on their market share.
The moratorium served to not only keep insurers in the marketplace but also avoided raising premiums. In 2020, the moratorium is set to lapse, and insurers will be responsible for paying an estimated $16 billion fee – a tax which undoubtedly be passed along to consumers in the form of premium adjustments.
It’s Still Smart to Shop Around for Coverage
Regardless of additional insurers entering the exchange marketplace, and a leveling of exchange plan premium prices, the average ACA plan premium for an individual is $600. While a majority of exchange plan enrollees receive subsidies to reduce their individual responsibility, many individuals do not qualify for subsidies and face a significant financial burden paying for exchange coverage. With reduced regulations paving a path for individuals to find alternative forms of health insurance coverage, this may be the perfect time for consumers to research affordable options such as short term health insurance.