Recent policy changes by President Donald Trump’s administration will make it easier for junk insurance plans to flood Maine’s health care market, putting Mainers at risk of higher out-of-pockets costs and reduced quality of care.
Two bills before the Maine Legislature would help prevent Mainers from being left in the health care lurch by low-quality health care plans. MECEP supports both bills and urges lawmakers to act swiftly to protect consumers.
Protections gained under the Affordable Care Act
The Affordable Care Act, or ACA, brought significant protections to Mainers and Americans purchasing health insurance plans. The consumer protection provisions of the law guaranteed that health insurance should be not only affordable, but should provide a minimum level of care to all patients without discrimination.
Plans sold on the ACA-created health insurance exchanges must cover patients with pre-existing conditions, for example. Insurance companies could not discriminate based on gender and must cover essential health benefits such as outpatient treatment, emergency care, maternity and newborn care, prescription drugs, and other services that create a comprehensive coverage plan.
Plans sold on the exchanges also qualified for federal tax credits that made coverage more affordable for low- and moderate-income Americans.
By improving the quality of coverage and making it more affordable, these provisions limited consumers’ exposure to junk insurance plans with high deductibles and shoddy coverage. By ensuring higher quality plans were available to all Americans, the ACA also created more stable insurance risk pools that would reduce premiums for all consumers.
ACA limited exposure to junk health insurance plans
The ACA didn’t just bolster the quality and affordability of health insurance plans sold on the market. It also limited consumers’ exposure to junk health insurance plans that left Mainers high and dry in the event of a health crises.
Junk insurance plans — also known by the technical name “short-term, limited-duration health insurance plans” or “STLD plans” — can seem attractive to consumers because they offer low monthly premiums. However, they offer far poorer coverage than other health care options.
The ACA recognized that consumers may need access to such health insurance plans on a short-term basis. The ACA allowed insurance companies to offer STLDs for up to the three months, providing consumers with a flexible, low-cost option to maintain coverage while they were between jobs or otherwise on the market for a long-term insurance plan.
These junk health insurance plans don’t have to cover pre-existing conditions or offer minimum coverage of essential benefits. Unlike plans regulated by the ACA, they can discriminate based on gender and age, charge women and older Mainers more for coverage. Junk health plans are appealing to insurance companies because they offer higher profits.
That incentive prompts insurance companies to spend vast sums on aggressive and sometimes deceptive marketing. The two carriers that offer STLD plans in Maine — American Independence and National General — spend half their revenue from premiums on marketing, overhead, and profit, compared to just 15-20 percent of premiums from ACA-compliant plans spent by other carriers.
Trump opens the floodgates
In 2018, the Trump administration announced that it would allow STLD plans to be sold for 12-month periods, with the option to renew for up to 36 months. This puts the STLD plans in direct competition with the ACA’s better-regulated plans, allowing sellers of STLD plans to lure consumers into the high-profit, low-value plans instead of the better-regulated ACA-compliant plans.
Now, Maine lawmakers are considering two bills, LDs 815 and 1260, to closely regulate the sale of junk health insurance plans. Lawmakers in several states have already taken steps to impose their own regulations on STLD plans. Maine legislators can protect Maine consumers as well.
Both LD 815 and 1260 would restore the 3-month limit for STLD plans, ensuring that they really are only used in the “short-term” as a last resort. Both bills would also require insurers to disclose the risks and limits of STLD plans in clear written form to customers.
National General and American Independence together cover only around 1,000 individuals,[i] though each expects to gain more customers in the coming years. National General predicts its membership would almost double between 2017 and 2019; American Independence predicts that it will nearly triple enrollment from 2017 to 2019. That means hundreds or thousands more Mainers exposed to an inferior product.
More junk insurance plans will increase costs for everyone
An increase in the use of STLD plans doesn’t just affect those Mainers who enroll in these low-quality plans. It also increases premiums for Mainers in other health insurance plans. On average, STLD plans target and attract younger, healthier Mainers. As these individuals switch from ACA-compliant plans to STLD plans, the ACA plans are left with a risk pool of slightly sicker and older Mainers, leading them to increase their premiums to cover the higher risk.
We’ve already seen this happen in Maine. In their 2018 rate filing, Community Health Options, the largest insurer in Maine’s individual health insurance market, said that the federal changes to STLD plans had led them to increase premiums by 5 percent in 2018. They predict a further increase of 5 percent in 2019. The non-partisan Congressional Budget Office predicted a similar 4-10 percent increase in premiums nationwide, while the Urban Institute predicted Maine’s premiums could rise an additional 15.6 percent with the increase in STLD plan enrollment.
Junk health insurance plans follow many of the worst practices of the health insurance industry that were commonplace before enactment of the Affordable Care Act. They make large profits through plans that offer poor value for the money and a low standard of care, sold through aggressive marketing. The Trump administration has made it easier for these shady companies to mislead Mainers.
Legislators should take steps to protect Mainers from junk insurance by supporting LDs 815 and 1260.
[i] Exact numbers of covered lives are not provided by the insurance companies in their rate filings with the Maine Bureau of Insurance. National General reported 7,170 member-months covered in 2017; American Independence reported 2,055 certificate-months in the same year.