Health Plans Get Creative Skirting the ACA

You have to give them credit – health insurers are showing just how creative they can be at shirking their obligation to provide new consumer protections under the Affordable Care Act. Just last month Christine Monahan and I documented how health insurers are taking advantage of a legal loophole that allows them to escape compliance if they early renew policies late in 2013. According to the Wall Street Journal, early renewals are being pushed by major insurers such as UnitedHealth Group, Aetna, and Humana. They’re also being marketed by Blue Cross Blue Shield plans in a number of states. Unfortunately, early renewals not only deny consumers many of the protections set to go into effect in 2014, but they could also make premiums higher for everyone in 2015.

Last week I heard of yet another strategy, this one marketed by Arkansas Blue Cross Blue Shield, to offer consumers a 364-day policy. As reported in the Arkansas Democrat-Gazette on Sunday, the Arkansas Blue Shield website lists the Essential Blue Freedom plan as a “full coverage plan” with “benefits that are not dictated by the new health care law.” Thus, while individual policies must comply with the ACA’s prohibition on lifetime caps on coverage, the Essential Blue Freedom plan imposes a $1 million lifetime cap. While individual policies have to offer the ACA’s set of essential health benefits and comply with the mental health parity law, this plan doesn’t cover maternity care (unless you buy it separately) and mental illness coverage is capped at $1000 per person per policy. And, while ACA-compliant individual policies can no longer discriminate against consumers based on health status, consumers must pass medical underwriting to enroll in and renew an Essential Blue Freedom plan.

How can Blue Cross Blue Shield get away with this? By taking advantage of yet another loophole in the law that allows insurers to sell so-called “limited duration” or short-term plans that are not regulated as traditional health insurance and thus exempted from many federal and state consumer protections. Short-term policies were originally designed for people who needed just that – short-term coverage – to get through a life transition, such as a gap between jobs. These were often 3-month or 6-month policies. With its 364-day plan, Arkansas Blue Cross has stretched the definition of short-term coverage beyond any reasonable interpretation.

What does it mean for consumers? First, consumers enrolled in these plans won’t be able to meet the requirement in the ACA that they maintain health coverage. Short-term policies are not considered minimum essential coverage under the law. As a result, if consumers buy these plans, they will have to pay a tax penalty with their 2014 tax return. Unfortunately, Blue Cross’ marketing materials – including the brochure – do not disclose this to consumers. According to a Blue Cross spokesperson, consumers can only find out that the coverage is inadequate after they submit an application.

Second – and what Blue Cross doesn’t say in its marketing materials – is that the reason they’re able to offer lower premiums in these plans is because they are so much skimpier than ACA-compliant coverage. And that means consumers are at greater financial risk if they get sick or injured.

Third, and perhaps most important in a state like Arkansas where an estimated 282,000 residents will be eligible for federal tax credits to reduce the cost of coverage, consumers could be persuaded to sign up for one of these plans in the mistaken belief they’re getting a better deal. If they do, they’re forgoing an opportunity to get premium tax credits and cost-sharing reductions through Arkansas’ health insurance marketplace. And the plans sold on the marketplace will be more comprehensive and provide greater financial protection.

Unfortunately, if Blue Cross Blue Shield in Arkansas sees short-term policies as a way to get around the ACA, it’s likely other companies in other states do, too. Especially if state regulators allow them to advertise these plans as “comprehensive” and “full” coverage, even when they’re not. For consumers, unless they’re shopping on the new health insurance marketplaces, they need to read the fine print and heed the saying “buyer beware” before enrolling in a plan.