By Lindsay Street, Statehouse correspondent | South Carolina’s insurance regulator says it will ensure consumers are aware of limitations of short-term health insurance, which is no longer is strictly regulated by the federal government.
In an exclusive interview, S.C. Department of Insurance (SCDOI) Director Ray Farmer said the state agency is currently drafting rules in response to a Trump administration directive that allows “skimpy” health plans to offer coverage for longer time periods. Short-term health plans do not have to cover prescription drugs, maternity care or people with pre-existing medical conditions.
“We are developing our own rules (to regulate the plans),” Farmer told Statehouse Report. “We want to make sure consumers read and understand their policy. Short-term limited-duration insurance is minimal coverage for a lower price than policies on the individual market. This is not major medical coverage and is only an ideal option for a limited number of people.”
Short-term health plans will now be allowed to offer coverage up to 12 months, and can be renewed up to 36 months, unless state legislatures or state insurance agencies further restrict the plans. Previously under Affordable Care Act rules, the plans could only offer coverage up to three months, and came with 14-font print that explained the limitations of the coverage.
The leader of the state Senate committee on insurance told Statehouse Report that there has been no such proposal to further restrict the plans legislatively in South Carolina. However, Chairman Ronnie Cromer, R-Lexington, said it may be October or November before lawmakers begin discussing regulation. Staff and members of the House’s similar committee did not respond to a request to comment on whether lawmakers are mulling further restrictions.
Plans to be sold soon
The expanded plans, which can deny a person for pre-existing conditions, can be sold as soon as Oct. 2, Farmer said.
Farmer said that in South Carolina there will be a requirement for insurance policies to have “bold print” that the plan does not include major medical events, similar to the old federal rules.
Health care experts around the state are expecting an increased number of these plans in the state, and they anticipate there could be consumer confusion, resulting in paying premiums for a plan that does not offer coverage for comprehensive care or major medical health issues.
“You’re going to see a greater appetite in the market for these plans for the people who can’t afford comprehensive medical coverage,” Columbia insurance broker Joel Lourie told Statehouse Report. Lourie is a former Democratic state senator for Kershaw and Richland counties. “We’ve got a real responsibility to make sure clients understand what they’re getting into what’s covered and not covered.”
An October 2017 executive order by President Donald Trump triggered the federal rule allowing extended short-term plans. It is widely viewed as one part of his effort to dismantle his predecessor’s health care legacy, the Affordable Care Act.
Farmer and Lourie said the type of health insurance coverage offered by these plans are necessary in the market.
“Short-term, limited-duration insurance is a type of health insurance coverage that was primarily designed to fill gaps in coverage that may occur when an individual is transitioning from one plan of coverage to another plan of coverage, such as in between jobs,” Farmer said.
Short-term plans cause concerns, have risk
Health care economist Lynn Bailey called short-term health insurance plans the “payday lending of health insurance” and “predatory.”
“You got to read the fine print and see what you aren’t paying for,” she said. “It puts the risk back on the patient that you just hope and pray that you don’t have a dread disease … People think they have insurance and they don’t.”
She said that while the plans appear affordable, many people will find they have been paying a premium and getting little in return.
“So where do people go when they are sick and they don’t have money? You go to the hospitals and they will be looking at rising and uncompensated care and the inability to increase rates to cover them,” Bailey said.
She said it could also negatively impact the health of residents in the state, which already scores low on several national lists for health outcomes (Most recently, the state ranked among the worst places to have a baby due to health care access).
“What you have to do to remain healthy is you should regularly see health care providers,” she said, adding that short-term plans do not pay for this type of care.
In addition to providing “gap” coverage, proponents of the plan also say they could help drive down rising insurance prices. But Bailey said the short-term plans won’t cause competition in the comprehensive care market, and could cause those plans to increase due to healthy consumers moving to short-term plans, rather than help buffer health care costs across the market.
S.C. Appleseed Legal Justice Center Executive Director Sue Berkowitz, who runs the nonprofit that offers legal help for the state’s poorest residents, said the plans could also deter people from receiving subsidized health insurance available through the state’s only provider, BlueCross BlueShield of South Carolina.
“My biggest concern is that people are going to be steered into these kind of plans rather than understanding that they could be eligible for an exchange plan, and people will end up getting less for more money,” Berkowitz said. “It will push people away from regular exchange plans, which are the plans that give more robust benefits to folk, as a way to provide not much benefit and for companies to be able to get a premium.”
Lourie said he will not recommend the plan to clients except in special cases.
“My recommendation to clients is if they can afford major medical coverage, they should get it,” he said.
Farmer also urged caution with the plans.
“Just remember, you get what you pay for,” Farmer said. “I urge every consumer to read their policy and policy provisions carefully. If a consumer would like help assessing their policy, they can reach out to the Department of Consumer Services here at the SCDOI.”
Varying restrictions
South Carolina’s proposed rules join a fabric of state rules nationwide. Here are a few recently passed bills:
- Maryland: Limits short-term plans to less than three months and does not allow insurers to extend or renew short-term plans.
- Vermont: Limits short-term plans to less than three months, does not allow insurers to extend or renew short-term plans, and requires disclosure language.
- Hawaii: Prohibits selling of short-term plans to those eligible to buying coverage through the ACA marketplace during the enrollment period.
- Illinois: Limits short-term plans to six months, restricts extensions and renewals, and requires warning language for consumers. (This bill has not been signed by Republican Gov. Bruce Rauner.)
Prior to this year’s federal action, Massachusetts, New Jersey and New York prohibited short-term plans, and Oregon limited short-term plans to three months or less and restricted renewals.
State insurance departments, like South Carolina’s, have also been responding. For example, Washington state’s insurance commission will seek to limit plans to three months and prohibit renewals. Tennessee’s agency is also looking to help inform consumers of the plans’ limitations.
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