Short-term Health Plans Skimp on Medical Payments

A new report by the trade publication Modern Healthcare shows just how little short-term care plans spend on enrollees’ medical claims.

The report found that some plans spent as little as 9 cents of every premium dollar they collected on medical care.

The average paid out among the short-term plans analyzed in a report by the National Association of Insurance Commissioners was 39.2%. That’s a far cry from the 80% of premiums health plans are required to spend on medical care to comply with the Affordable Care Act.

The figures shine a harsh light on just how little short-term health plan policyholders benefit from the plans they purchase. 

The Trump administration issued regulations in 2018 that extended the amount of time someone can enroll in a short-term health plan to 12 months, and policyholders can renew coverage for a maximum of 36 months.

These plans do not have to comport with the ACA, like not covering 10 essential benefits and not having to cover pre-existing conditions – and they can even exclude coverage for medications.

2018 short-term health plan medical outlays*

Cambia Health Solutions: 9.3%

Spectrum Health: 36.1%

Genève Holdings: 36.2%

UnitedHealth Group: 37.3%

Medical Mutual of Ohio: 40.4%

Blue Cross and Blue Shield of SC: 44.2%

* As a percentage of premium charged

The above chart means that for every dollar collected in premium, the average short-term plan spent 39 cents on medical care for policyholders – with the rest spent on administration or kept as profit.

Short-term plans usually lack the consumer protections found in ACA-compliant plans and they have gaps in coverage that may not be readily apparent in marketing materials, which makes it difficult to compare plans and understand the full scope of coverage.

Importantly, as stated above, they are not required to and usually don’t cover the 10 essential health benefits that the ACA requires compliant plans to cover at no cost to the enrollee.

This scant coverage makes these plans much cheaper than ACA-compliant plans.

Here are some of the features of short-term plans that ACA-compliant plans are not permitted to offer:

Use health histories to determine who can get coverage – Applicants for short-term plans must often answer a health questionnaire used to screen out applicants with symptoms of an illness or condition – even if not yet diagnosed or treated. Some plans also exclude coverage for conditions for which medical advice, diagnosis, care or treatment was recommended or received in the prior 12 months.

Exclude key service categories from covered benefits – Few if any short-term plans cover maternity. Prescription drugs are not always covered, or they are only partially covered. Some plans exclude coverage for mental health, substance use disorder services, and tobacco cessation treatment.

No pre-existing conditions – Few short-term plans cover any pre-existing conditions. Typically, they cover only what’s listed in the Schedule of Benefits. If one of those is a pre-existing condition, it will likely have a cap of no more than $30,000. Also, insurers will often deny claims or cancel coverage for conditions they consider to be pre-existing.

Covered services limited – Many short-term plans have covered benefit limits like:

  • $1,000 per day for a hospital room and board
  • $1,250 a day for intensive care
  • $50 a day for doctor visits while in hospital
  • Total benefits are often capped at little more than $100,000 per year.

Renewal not guaranteed – Short-term plans will rarely guarantee renewal. If an enrollee suddenly develops a new health condition, the plan will likely not renew them.

Small Employers Can Reimburse for Medicare Part B, D Premiums

As the workforce ages and many employers want to keep on baby-boomer staff who have the experience and institutional knowledge that is irreplaceable, one issue that always comes up is how to handle health insurance.

Once your older workers reach the age of eligibility for Medicare, under current law you can help them pay for Part B and D premiums with a Medicare Premium Reimbursement Arrangement. These types of arrangements became legal after legislation was signed into law in 2013 to help employers provide benefits to their Medicare-eligible staff.

But the issue surfaced again recently when the Trump administration came out with new guidance for health reimbursement arrangements that paves the way for employers to set up HRAs to reimburse staff for health premiums in their personal (not company group) health plans.

Anybody who is about to turn 65 has a six-month period to sign up for basic Medicare, but if they want additional coverage they can pay for Medicare supplemental coverage such as Parts B and D.

Part B covers two types of services:

Medically necessary services: Services or supplies that are needed to diagnose or treat your medical condition and that meet accepted standards of medical practice.

Preventive services: Health care to prevent illness (like the flu) or detect it at an early stage, when treatment is most likely to work best.

Part D, meanwhile, covers prescription drug costs.

The dilemma for employers has often been whether to keep the Medicare-eligible employee on the company health plan or cut them free on Medicare.

Smaller employers – those with 20 full-time-equivalent employees – have the option to open a Medicare Premium Reimbursement Arrangement for those employees if they are coming off a group health plan and into Medicare.

For small employers, it’s legal to set up an arrangement like that, as long as doing so is at the employee’s discretion. Employers are not allowed to push an employee into a Medicare Premium Reimbursement Arrangement in order to get them off the company’s health plan.

The good news for employers is that they often can reimburse their employees in full for Part B and D, as well as Medicare Supplement, and still pay less than they would pay in group employee premiums alone. 

On top of that, the employee gets a lower deductible and overall out-of-pocket experience with less, if any, premium contribution.  

What you need to know

Here’s what you should know if you’re considering one of these arrangements:

A Medicare reimbursement arrangement is one where the employer reimburses some or all of Medicare part B or D premiums for employees, as long as the employer’s payment plan is integrated with the group’s health plan.

To be integrated with the group health plan:

  • The employer must offer a minimum-value group health plan,
  • The employee must be enrolled in Medicare Parts A and B,
  • The plan must only available to employees enrolled in Medicare Parts A and B, or D, and
  • The reimbursement is limited to Medicare Parts B or D, including Medigap premiums.

Note: Certain employers are subject to Medicare Secondary Payer rules that prohibit incentives to the Medicare-eligible population.

The Costliest Claims for Catastrophic Conditions and the Drugs Used to Treat Them

A new report by Sun Life Insurance Co. highlights the top high-cost claim conditions that plague the U.S. health care system and account for more than half of all catastrophic or unpredictable claims costs.

The top 10 costliest claim conditions comprised over half (51.8%) of the $3 billion that Sun Life reimbursed to stop-loss policyholders from 2014 to 2017.

Stop-loss insurance (also known as excess insurance) is a product that provides protection against high-cost claims. It is purchased by employers that self-fund their own health plans, but do not want to assume 100% of the liability for losses arising from the plans.

The “2018 Stop-Loss Research Report,” which Sun Life has been publishing annually for the past six years, provides a glimpse into the kinds of claims that can have an outsized effect on both insured and self-insured employers’ health plans, and can drive overall expenditures.

Here are some of the other main highlights from the study:

  • Cancer treatment costs comprised 27% of all stop-loss claim reimbursements between 2014 and 2017.
  • The number of health plan enrollees that had claims costing more than $1 million increased by 87% during the four-year study period. In 2017, this group comprised 2.1% of claims, but accounted for 20% of all stop-loss claims reimbursements.
  • The aggregate costs of injectable drugs that were part of claims that cost more than $1 million grew 80% from 2014 to 2017.

The most expensive catastrophic claims and the amounts Sun Life paid out in the aggregate between 2014 and 2017 are as follows:

  • Malignant neoplasm (cancer) – Total paid out: $564 million (portion of total catastrophic claims: 19%)
  • Leukemia, lymphoma, and/or multiple myeloma (cancers) – $235 million (8%)
  • Chronic/end-stage renal disease (kidneys) – $153 million (5%)
  • Congenital anomalies (conditions present at birth) – $115 million (4%)
  • Transplant – $103 million (3.5%)
  • Septicemia (infection) – $88.5 million (3%)
  • Complications of surgical and medical care – $78 million (2.5%)
  • Disorders relating to short gestation and low birthweight (premature birth) – $74 million (2.5%)
  • Liveborn (short gestation/low birth rate, and congenital anomalies) – $69 million (2%)
  • Hemophilia/bleeding disorder – $68 million (2%)

Injectable drug costs

Injectable drugs (which include those delivered by IV or that are self-administered injectable medications) accounted for 8.5% of the total paid out for high-cost claims.

But that’s just the average for the four-year period. Injectable drugs are accounting for a greater share of overall catastrophic claims costs, reaching 9.3% in 2017.

In 2017 alone, 418 drugs contributed to the total $186.3 million that was spent on injectable medications for high-cost claims. But, 62% (or $114.7 million) of the cost was attributed to the top 20. The top five medications accounted for nearly 30%.

Please note that the injectable drugs on the high-cost list are there for different reasons. Some are on the list because of the frequency (how often they are used and how many patients are given the drugs) that they are administered, and others are there because their cost is extremely high.

As an example, the report points to the two top injectable treatments – cancer drugs Yervoy and Neulasta.

Neulasta (used to reduce the chance of infection in patients undergoing chemotherapy) was administered to 354 patients and cost on average $33,800 per dose.

On the other hand, Yervoy, used to treat melanoma that has spread or cannot be removed by surgery, was administered to just 43 patients, but the cost per dose was $323,000.

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