Short-Term Health Insurance Sales Spike

Sales of short-term health insurance, also known as gap insurance, have spiked since 2014 when many of provisions of the Affordable Care Act took effect, according to the Wall Street Journal article, Health Law Spurs Hunt for Cheaper Policies. These short-term health insurance policies are not compliant with ACA regulations so consumers must also pay applicable penalties for not having insurance that meets ACA standards.

The article shares the short-term health insurance policy of Robin Herman, a healthy 34-year-old marking firm owner from San Francisco.

Ms. Herman’s new policy, like many short-term plans, doesn’t cover pre-existing conditions, a limitation no longer allowed in full health coverage. Ms. Herman’s plan also caps total benefits at $1 million, another feature prohibited in ACA plans. It doesn’t cover most prescription drugs. To get the plan, Ms. Herman had to qualify as healthy by answering a questionnaire. ACA plans are sold to every consumer regardless of health status.

The article states that many young and healthy consumers are looking to short-term plans because they find the ACA plans prohibitively expensive. Since ACA policies must cover pre-existing conditions, consumers can always purchase an ACA policy if they develop health problems.

The short-term policies’ limits help keep premiums down. A survey by eHealth Inc. this year found that 51% of purchasers cited price as their reason, versus 39% who said they needed only temporary coverage.

It’s no surprise then that this is concerning with respect to the sustainability of the ACA marketplaces.

The short-term plans can siphon off healthy people who are needed to help make the ACA insurance business work. Those consumers then add to the costs of ACA plans if they buy coverage only when they have health needs. “You cause some real problems for the market,” said Timothy S. Jost, a professor at Washington and Lee University.

All in all, none of this is surprising. But it's significant because shows quantitatively (the article includes a lot more data that I didn’t include in this summary) that many consumers cannot afford ACA plans or simply don’t want or need the comprehensive coverage that ACA plans offer.

The Pill Should Really Be Over-The-Counter

Time Magazine published a piece this morning entitled Women Should Not Have to Visit a Doctor For Birth Control about the legislation that goes into effect this year allowing women in Oregon and California to get a prescription for oral contraceptives from their pharmacist rather than first scheduling a doctor appointment. The article further went on to say that while these laws are a step in the right direction they don’t go far enough because ideally women should be able to get oral contraceptives without a prescription. For years, according to the author, the American College of Obstetrics and Gynecology (ACOG) has recommended that oral contraceptives be made available over-the-counter, which is how contraceptives are sold in 102 other countries in the world. 

So it would appear that if ACOG, the physician group with the most experience with the pill, supports selling it over-the-counter, there would be no reason not to go ahead and make the pill available over-the-counter. It may sound obvious, but it isn't happening (very quickly)- and it appears to be due to health insurance and the Affordable Care Act (ACA).

One of the mandates of the ACA is that it is necessary to have a prescription, even for an over-the-counter medication, for insurance to cover the medication or for the patient to be able to pay with Health Savings Account (HSA) or Flexible Spending Account (FSA) funds. The Affordable Care Act also mandates that all FDA-approved contraception is fully covered by health insurance.

California and Oregon have finagled their way out of this tangle of regulations by having pharmacists prescribe oral contraception, thus women have easier access to the drugs while guaranteeing that oral contraceptives continue to be covered in full by health insurance companies. Replacing physicians with pharmacists does lower the barrier, but it doesn’t completely eliminate it. For example, Oregon’s law requires pharmacists to consult with women who wish to obtain hormonal contraceptives and ensure that the woman has a primary care physician for follow-up.   We don’t have these requirements for Tylenol yet taking more than the recommended amount of it can cause liver damage, ranging from abnormalities in liver function blood tests, to acute liver failure, and even death. Why do we place obstacles in the way of purchasing oral contraceptives but not Tylenol? I don’t have hard evidence but I would bet that women are more likely to discuss proper administration and any potential side effects of oral contraception than of Tylenol with physicians or pharmacists.

Now, on to cost. Many democrats argue that by making the pill available over-the-counter, patients would be responsible for the full cost of the medication, thus circumventing the portion of the ACA which mandates that all FDA-approved contraception is fully covered by insurance. Due to this Senator Patty Murray of Washington recently introduced the Affordability Is Access Act which would require insurance companies to cover all FDA approved contraception, even if some forms of contraception, like birth control pills, become available without a prescription.

However, we know from past experience that when prescription drugs become available over-the-counter, prices fall dramatically. When the allergy medication Claritin became available over-the-counter in 2002 the cost of the drug fell by one-half or even more to about $1 a pill so that a months supply cost roughly $30. When the generic version came on the market it sold for about $0.35 a pill, or $10.50 a month. I checked the price of generic Claritin at Walmart and it now sells for $0.124 a pill, or $3.71 for a thirty-day supply. And this is the result of transferring just one drug to over-the-counter status, not transferring a whole category of drugs! There are currently 218 brand-name birth control pills and 21 generic birth control pills available so if all of those suddenly became available over-the-counter cost would be driven down quickly and dramatically. In fact, for those without health insurance, Walmart right now offers a cash price of $9 for a one-month supply on nine different generic oral contraceptives. So there is no reason to believe that oral contraception has to cost $600 a year.

It may appear that birth control pills are now “free” for those with health insurance, but just because there is no exchange of money when a woman picks up her oral contraception doesn’t mean that the cost has vanished. It is naïve to think that health insurance companies just eat the extra cost of paying for all FDA-approved contraception in full. Instead of continuing to hide the inflated price of oral contraceptives from consumers, now is the time to bring access to oral contraceptives to every woman who is able to get herself to a pharmacy and to bring down the true cost of oral contraception to a level that is affordable for every woman.