Do Short-Term Limited Duration Plans Deserve Industry Skepticism?

Short-term limited duration policies may provide lower premium rates, but when patients contract unexpected, high-cost health conditions, these plans may leave members exposed to higher out-of-pocket healthcare spending, a Milliman study found.

“The findings of this study confirm what we long suspected—that the design of these plans leaves patients vulnerable to expensive bills," Gwen Nichols, MD, Leukemia and Lymphoma Society (LLS) chief medical officer, said in a press release. LLS commissioned the study.

"Short-term plans don't offer typical health insurance benefits and provide very little protection when a patient faces a serious, unexpected diagnosis,” Nichols added. “LLS is working at the state and federal levels to protect patients from these dangerous plans. We urge cancer patients and their caregivers to ask questions about whether their treatments are covered by these plans, given their serious shortfalls.”

Milliman used two short-term limited duration health plans. One was a hypothetical conglomerate of the most common short-term limited duration features. The other was the most popular short-term limited duration plan in Atlanta, Georgia, which was UnitedHealthcare’s Short Term Medical Value Select A policy.

The researchers compared these plans to the most popular ACA-compliant plan in the Atlanta region: the Anthem Bronze Pathway X Guided Access HMO 4600 Online Plus.

The analysis confirmed that short-term limited duration plans have less benefit coverage and lower financial protection than ACA plans do.

The most popular short-term limited duration plan did not offer coverage for prescriptions, mental healthcare services, or maternity services. For many plans in the area, mental healthcare services included substance abuse care, so these too were often excluded from coverage under short-term limited duration plans.

Every short-term limited duration policy included in the study had a pre-existing conditions exclusion provision, which is not permitted for ACA-compliant plans.

The plans often only lasted half a year and renewal was not guaranteed, as it is in ACA-compliant plans. This left patients exposed to high out-of-pocket costs if their plan was not renewed because they would have to wait for the next enrollment period to start in order to get a different policy.

The maximum deductible for the popular short-term limited duration health plan was three times the popular ACA plan. Overall, 25 percent of the short-term limited duration policies had a deductible that exceeded the ACA-compliant policies’ maximum limit.

The maximum out-of-pocket healthcare spending limit for the short-term limited duration policy was also nearly three times the ACA plan, reaching $22,500 and $7,900, respectively. Sixty percent of the maximum-out-of-pocket healthcare spending limit over $7,900 and more than 25 percent exceeded $15,000.

Short-term limited duration plans could also have a policy maximum coverage limit, meaning that after a certain amount of expense the plan did not have to cover any other member costs. For 88 percent of short-term limited duration policies in the area, the maximum limit was $1 million or $2 million.

Policy maximum coverage limits are prohibited for ACA-compliant plans.

And while coinsurance was equal for the most popular short-term limited duration and ACA-compliant plans, the researchers found that most short-term limited duration plans did not provide sufficient cost-sharing information for members to predict their costs.

So, why would anyone choose a short-term limited duration plan?

At the bottom of the comparison chart between the most popular short-term limited duration and ACA-compliant plans, Milliman placed the price tag: the ACA bronze plan’s premium was nearly four times the price of the popular short-term limited duration plan.

It costs a 27-year-old female nonsmoker $77.10 per month to stay on UnitedHealthcare’s Short Term Medical Value Select A policy, but it would cost her $293.01 per month to afford the Anthem Bronze Pathway X Guided Access HMO 4600 Online Plus ACA-compliant bronze policy.

However, what saves patients money in the short term, month-to-month could cost them an exorbitant amount in medical bills if they actually have to use the policy.

The study looked at patients’ out-of-pocket healthcare spending for five high-cost medical conditions: lymphoma, heart attack, lung cancer, diabetes, and mental health or substance use disorder hospitalization.

Across all five conditions, patients paid more overall in a six-month short-term limited duration plan than in an ACA-compliant plan. The difference ranged anywhere from $3,200 for diabetes to more than $41,000 for lung cancer. 

The differences were even more acute when the patient’s short-term limited duration was not renewed after three months, resulting in no coverage for three months. Costs were generally above $45,000, hitting as high as $103,400 for lung cancer.

Most patients with severe conditions seemed to recognize the advantages of richer benefits for higher monthly cost. The incidence of lymphoma in a bronze, silver, gold, and platinum plans far exceeded the incidence in catastrophic plans, which may have a similar demographic to those who enroll in short-term limited duration policies. And the incidence of high-cost conditions increased with each escalating tier.

Even though patients in the higher tiers were paying an average monthly unsubsidized premium of anywhere from $364 to $681, as opposed to $104 to $214 per month for short-term limited duration plans, patients realized the higher premium could spare them from crushing medical bills.

Short-term limited duration plans have been a source of contention politically. Not only has the policies’ overall efficacy been investigated, but even individual plans’ marketing tactics have been called into question.

However, the Milliman report elucidates the impacts on the consumer, exploring whether skepticism from states, courts, and industry organizations is warranted.

“Our research suggests that individuals enrolled in ACA bronze or catastrophic policies, which may resemble the demographic profile of individuals enrolled in STLD policies, have lower incidence rates of costly medical conditions than those enrolled in richer benefit plans. While STLD products often offer lower premiums than ACA coverage, individuals can be exposed to high medical expenses,” the researchers stated.

“The results of our study on the expansion of STLD policies have important implications on both individuals considering purchasing an STLD policy as well as the ACA-compliant individual marketplace as a whole,” the researchers concluded. “Patients electing coverage under an STLD policy should be aware of the financial exposure they could face if diagnosed with a costly medical condition.”