February 14, 2021

The High Cost of Cheap Health Insurance

Consumer Reports has no financial relationship with advertisers on this site. In response to the…

Consumer Reports has no financial relationship with advertisers on this site.

In response to the ongoing COVID-19 crisis, President Joe Biden recently signed an executive order reopening enrollment in Affordable Care Act insurance plans for three months starting Feb. 15.

But if you are shopping for a new plan, beware: In your search, you may come across ads for “short term” health insurance plans that can seem tempting, with surprisingly low premiums, but that may cost more in the long run by providing skimpy coverage when you need it most.

“If you get sick, short-term health insurance plans may pay little or nothing to cover your actual medical needs, and they can sharply raise your rates or drop you entirely,” says Chuck Bell, who has followed the health insurance industry at Consumer Reports for more than 20 years. He notes that while the plans have been around for a while, the Trump administration extended the period they could cover from just three months to a full year. “Even if you stay well, these plans typically offer scant coverage and may entirely exclude even basic services like prescription drugs or immunizations.”

States, rather than the federal government, regulate short-term plans, which currently cover about 3 million Americans. Only four states—California, Massachusetts, New Jersey, and New York—have banned them. And just 20 regulate them in a significant way, according to a damning 200-page report last June by members of the U.S. House of Representatives Committee on Energy and Commerce.

That report detailed more than a dozen business practices—such as dropped coverage, limitations for lifesaving procedures, and poor protections during an emergency—that can jeopardize the financial and physical health of people enrolled in the plans.

You won’t find these plans on Healthcare.gov—the main portal for Affordable Care Act health insurance. Rather, you have to buy them from an insurance broker, who is incentivized with commissions as much as 10 times higher than what they get for selling ACA plans, according to the congressional report. It also says brokers may not explain to consumers the full coverage details or offer alternatives.

For example, an October 2020 Government Accountability Office report describes an investigation by researchers at the agency in which they contacted 31 brokers saying they were looking for short-term coverage. Eight of the brokers used deceptive tactics, such as claiming certain conditions were covered when they weren’t, according to the GAO researchers, who reported the brokers to the Federal Trade Commission.

An earlier investigation by the USC-Brookings Schaeffer Initiative for Health Policy suggests that some brokers for short-term plans may provide misleading coverage even for COVID-19-related health problems. Researchers secretly shopped for short-term plans among nine brokers saying they were motivated by “concerns about COVID-19.” They found most provided misleading—and sometimes outright false—information.

“Short-term plans are options that may work for some Americans to bridge gaps between major medical plans,” says Kristine Grow, a spokesperson for the America’s Health Insurance Plans, an industry group. But, she says, “They should not be considered a long-term replacement for comprehensive coverage.”

Savings Might Not Be Large

Short-term plans, originally created in the 1990s, were meant to be temporary. “The idea was for them to be a stopgap for a few months for people between jobs or who had just come off their parents’ insurance,” says Karen Pollitz, senior fellow and an expert on short-term health insurance policies for the Kaiser Family Foundation (KFF), a nonprofit healthcare research organization.

But in 2018 the Trump administration allowed short-term coverage to extend up to 12 months, and be renewed for up to 36.

Marketers of the plans say they give people cheaper alternatives, and the low rates can be attractive, Pollitz says. A November 2019 analysis by eHealth, an online health insurance broker, found that the monthly premiums on short-term plans were, on average, 80 percent less than the premiums for ACA plans. For example, eHealth found that the monthly premium for a family of three in one of the lowest-cost ACA plans without a federal subsidy came in around $862; for a short-term plan, the monthly premium was $116.

But eHealth found that for people who do qualify for a federal subsidy, the premium for an ACA plan was $297—still more than for a short-term plan but much less than a long-term plan without the federal subsidy.

And the Biden administration is reportedly planning to expand subsidies for ACA plans, making them a better option for people who earn more. For those making more than 400 percent of the poverty line—$51,000 for an individual and $106,000 for a family of four—Biden’s proposal reportedly would ensure that a person doesn’t pay more than 8 percent of their income.

Short-Term Shortcomings

Even when people do save substantially with a short-term plan, the trade-off might not be worth it.

“One of the biggest concerns with short-term plans is that they look and feel like a regular plan when they are not,” says Emily Curran, a researcher at the Center on Health Insurance Reforms at Georgetown University.

For example, these plans often don’t offer the ACA-mandated “essential benefits” (PDF), including wellness services, immunizations, and adequate catastrophic or emergency care coverage. And there is no limit on deductibles, often requiring consumers to pay many thousands of dollars before coverage begins. For example, one consumer was reported in the congressional investigation to have a $5,000 deductible—which renewed each quarter.

Specifically, the plans may fall short in these areas.

Women’s health and pregnancy: Short-term plans are perhaps most concerning when it comes to women’s healthcare. Women who see an OB-GYN for routine pelvic exams or need birth control may find that their plans don’t cover those services. Some of the companies the congressional report reviewed provide no coverage for maternity and newborn care.

What’s more, women who become pregnant while covered by a short-term plan may be subject to intrusive fact finding.

The June 2020 congressional report cites the case of a woman who discovered she was pregnant days after her application for short-term health insurance was accepted. The insurer, BCI, denied the related claims she submitted, calling the pregnancy a “preexisting condition.”

To prove it wasn’t, the woman said in a complaint that she was forced to explain that she’d had a normal period just two days prior to the application being filled out and that “I had no way of knowing [I was pregnant] until there was enough pregnancy hormone in my system to show a positive reading.”

BCI did not respond to a request for comment.

Lack of maternity coverage by short term insurers is “discriminatory,” the report found, an effort to “avoid enrolling women of childbearing age.” By contrast, all ACA plans, by law, must cover you regardless of your pregnancy status.

And whereas ACA plans also do not set prices based on gender, the House investigation found that short-terms plans charged women up to 50 percent more than men for the same coverage, with one plan charging women ages 30 to 34 up to twice as much as men.

Preexisting conditions: Short-term insurance companies review applicants’ medical histories going back as far as five years to uncover conditions they use to deny coverage, the congressional report noted. That can result in their refusal to pay for insulin for diabetics, inhalers for asthmatics, and any medical need arising from conditions like heart disease, seizure disorder, or cancer.

Sometimes whether or not a condition is preexisting is not so clear-cut.

In November 2018, just a few weeks before signing up for a short-term plan, Perry McGuire of Pinal County, Ariz., was found during a routine screening test to have an elevated prostate specific antigen (PSA) level, a possible indicator of prostate cancer, according to allegations made in an October 2020 lawsuit he brought against the insurance company, Golden Rule.

Two months later, after his coverage had begun, McGuire was diagnosed with the disease and required surgery, the suit alleges, but Golden Rule refused to cover any of those charges, claiming his prostate cancer was a preexisting condition. Ultimately, McGuire’s treatment bills grew to more than $265,000, he alleges. The lawsuit is ongoing.

Golden Rule did not respond to a request for comment.

Coverage problems could also extend to people with COVID-19. “If a consumer was infected with COVID-19 or experienced symptoms prior to enrolling in a short-term plan, the illness could be considered a preexisting condition and the plan could deny coverage,” says Curran at Georgetown.

By contrast, plans offered through the ACA cannot deny you coverage for having a preexisting condition of any kind, including COVID-19, or deny claims related to them, Pollitz says.

Basic care and prescriptions: Routine exams, screenings, and immunizations—things people reasonably expect insurance to cover—often aren’t in short-term plans, according to the congressional report.

That includes prescription drugs. According to an analysis last year of 12 short-term plans by the Commonwealth Fund, “11 excluded nearly all coverage of prescription drugs,” says Curran, who was an investigator in that study.

Provider networks: According to numerous complaints reviewed in the congressional report, consumers are often unable to find a single provider who accepts the insurance. Even if you do find an in-network provider, coverage might be denied after the service and doctor are approved.

This is what James Garth of Scottsdale, Ariz., alleges happened to him, in a lawsuit he filed in May 2020 against his insurer, Meritain Health. He had developed an infection in his toe that spread up his foot. Meritain wouldn’t cover treatment in the hospital Garth went to, so he was transferred to another. But even there, the suit alleges, Meritain refused to cover the resulting $75,000 medical bill. The lawsuit is ongoing.

Meritain did not respond to a request for comment.

What to Do Instead

If you’re looking for affordable health insurance, experts suggest that instead of turning to a short-term plan you consider these steps:

See if you qualify for Medicaid. In 36 states and the District of Columbia, Medicaid was expanded to cover more people who’ve lost health insurance. And despite its reputation, coverage with Medicaid is far broader and more generous than short-term plans.

Individuals with a monthly income of up to $1,467 and families earning up to $3,013 qualify, according to the KFF. Check with the Centers for Medicare & Medicaid Services.

In other states, Medicaid is available to those with children who make, on average, about $8,700 or less annually for a family of three.

If you live in a state that hasn’t expanded Medicaid—Alabama, Florida, Georgia, Kansas, Mississippi, North Carolina, South Carolina, South Dakota, Tennessee, Texas, Wisconsin, and Wyoming—but you have children under age 19 not covered by health insurance, look into CHIP—the Children’s Health Insurance Program. You can check eligibility here. If you’re pregnant and have low or no income, every state’s Medicaid program will cover you, says Pollitz at the KFF. Contact your state’s Medicaid office for information on how to enroll.

Find out whether you’re eligible for a subsidized ACA plan. You can do this at Healthcare.gov. Individuals who earn up to $51,040, or families of four with incomes up to $104,800, can get reduced rates. Most people receive some sort of subsidy, with the average monthly premium running about $87.

If you already have an ACA plan, and you or someone in your household lost income this year, you may qualify for a larger subsidy. Check with Healthcare.gov.

Signing up there has another benefit: If you’re ineligible for a subsidy now but your financial circumstances change during the year and you become eligible, you’ll be able to get money back on your tax return, says Christen Linke Young, deputy director of the Domestic Policy Council for Health and Veterans at the Brookings Institution.

See if your state runs its own marketplace. Some states, including California, Massachusetts, and New York, offer insurance with federal subsidies to lower the premium. See whether your state is one and find provider contact information.

Consider COBRA. If you were employed in a business with more than 20 full-time employees, you may be able to continue your health coverage, though you will have to pay for it in full. You have 60 days after losing your job to decide. This can be a good option if you have complex health conditions or need ongoing treatment.

Consider a federally funded health clinic or charity care. While this is not a substitute for having health insurance, know that in many cases you needn’t forgo necessary medical care if you are not insured.

There are more than a thousand federally funded and charity medical centers throughout the U.S., some of which have on-site pharmacies where you can fill prescriptions for low or no cost. To find a federally funded community health center near you, use the Find a Health Center tool run by the federal Health Resources & Services Administration. To locate a charitable clinic or pharmacy in your area, use the Find a Clinic tool run by the National Association of Free and Charitable Clinics.

The Case of HealthCare Sharing Ministries

If you’re looking for a low-cost way to cover your healthcare costs, you may come across something called a Healthcare Sharing Ministry (HCSM).

About a million people in the U.S. belong to one of these groups, in which healthcare costs are shared among people with common religious or ethical beliefs, according to a report by the Commonwealth Fund. Each member is charged a monthly fee, with monies redistributed to pay for other members’ medical expenses.

While membership isn’t exactly cheap—they can run several hundred dollars a month for a couple, according to figures from Samaritan Ministries, one of the largest HCSM providers—that may still be lower than the monthly premiums on an unsubsidized ACA plan.

The problem, though, is that while the groups use the language and structure of health insurance—including terms like deductibles, monthly premiums, networks, and copayments—HCSMs are not health insurance and do not guarantee payments for a member’s medical claims. This is something that can catch consumers who are unaware, according to the Commonwealth Fund.

That means the HCSM can refuse to cover your bills, leaving you stuck with them.

For example, George Kelly, of Neosho, Miss., says he signed up for coverage with an HCSM called Trinity Healthshare in 2018 and allegedly wound up owing a total of about $2,000 in medical expenses due to unpaid claims for routine care, according to a class-action lawsuit brought against the company in June 2020. The lawsuit also alleges that Trinity Healthshare refused to cover needed hernia surgery at his local hospital, so he had to cover the full $3,000 cost out of pocket.

Kelly told CR that he and his wife were surprised. “That’s why we signed up, to have our local doctors and nurses and hospitals all in the network,” he says.

Instead, Kelly, who runs his own landscaping business, says he had to drive 3 hours to Oklahoma City and spend two nights in a hotel so he could work with a medical group that offered lower-cost treatments for people paying entirely out of pocket.

An attorney for Trinity Healthshare, since renamed Sharity Ministries, declined to comment directly on Kelly’s claims, given that the litigation is ongoing, but said the vast majority of its customers continue to be satisfied and see Sharity Ministries as a “cost-effective medical payment arrangement.”