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.

Do Americans Believe There is an Association Between Health Care Prices and Quality of Care?

A recently published article by the Journal of Health Affairs asked over two thousand adults four questions about the relationship between health care prices and quality. The study found:

Most Americans (58–71 percent, depending on question framing) did not think that price and quality are associated, but a substantial minority did perceive an association (21–24 percent) or were unsure whether there was one (8–16 percent). Responses to questions framed in terms of high price and high quality differed from responses to questions framed in terms of low price and low quality. People who had compared prices were more likely than those who had not compared prices to perceive that price and quality were associated.

The purpose of the study was to try to gauge how consumers will respond to health care price information tools many organizations are currently developing. The concern is that patients may avoid low-price care when making decisions.

Studies like this ignore the most important issue: will patients be spending their own money (as in a high deductible health plan) or mostly someone else’s (as in a low-deductible health plan)? With a high-deductible health plan, the patient will factor in price much more heavily than in a low-deductible plan when the patient is shielded from much of the price difference. So I question the usefulness of these results. 

Do you believe prices are correlated to quality in medical care? Do you comparison shop based on price?

How to Save Money on Medical Expenses? Hide Your Health Insurance Card

Melinda Beck does an excellent job examining the potential cost-savings (and pitfalls) associated with paying cash for hospitals and other medical services in the Wall Street Journal article How to Cut Your Health-Care Bill: Pay Cash (published February 15th). This article is specifically targeted to those with high-deductible insurance plans but really anyone who has medical expenses will find the piece interesting.




For years, the general consensus has been to go to providers that have a negotiated rate with your health insurance company to save money on medical expenses. However, as this article highlights with numerous examples, that is not always the case anymore. Cash prices are often significantly lower than the insurance negotiated rates. The article explains:

That is partly due to new state and federal rules aimed at protecting uninsured patients from price gouging. (Under the Affordable Care Act, for example, tax-exempt hospitals can’t charge financially strapped patients much more than Medicare pays.) Many hospitals also offer discounts if patients pay in cash on the day of service, because it saves administrative work and collection hassles. Cash prices are officially aimed at the uninsured, but people with coverage aren’t legally required to use it. 

The reason that many people are aware of this is because cash prices are generally not posted. According to James Lazarus, a vice president of Advisory Board Co., this is because,

“If insurers find out that plan members are able to access a cheaper cash rate, they’ll call up the hospital and say, ‘That’s our new contracted rate,’ ” he says."

So I was pleasantly surprised to see quotes in the article from insurance company executives supporting patients who choose to pay cash instead of billing insurance. Logically it makes sense: patients are paying a monthly insurance premium regardless and cash payments do not (generally) count towards patients' deductibles. However, that still doesn't mean that insurance companies want to be charged a clearly inflated price.

The article also brings up the important point of meeting the deductible. If a patient expects to have a lot of medical expenses within the calendar year it may make sense to pay the insurance-negotiated rate in order to be able to apply the expense towards the deductible. That way the year's remaining medical expenses should be partially covered by the insurance company.

One issue I wish the article would have addressed is the gray area surrounding insurance status disclosure. The piece does mention Boulder Community Hospital and Regional Medical Imaging of Flint, Michigan allow their patients to chose between billing insurance and paying the cash price, and Chief Financial Officer Bill Munson of Boulder Community Hospital even states,

“Patients have the right under federal law to request that we not bill their insurance,” he says, “and when they do, they have the right to participate in our self-pay program.”

However, this sort of openness is not wide spread. In general, doctors and hospitals that have contractually agreements with specific insurance plans are contractually bound to charge patients with those insurance plans the plan's negotiated rate for a particular service or procedure. So if a patient discloses she or he has insurance coverage, and the medical provider has a contract with the insurance plan, the patient will be charged the insurance negotiated rate. However, if a patient does not disclose he or she has insurance coverage, the patient could pay the cash price.

This creates a dilemma. Obtaining the cash price is straightforward if the facility or medical provider is cash-pay friendly, meaning a cash price list is readily available or at least when you ask the cash price you don’t get a blank stare. However, determining the insurance negotiated rate is typically a lot trickier. More and more insurance companies are making prices transparent as enrollment in high-deductible health plans increases, so definitely check with your insurance company, but often times the insurance company will say they can't know for certain how much the procedure or service will cost because that depends on how the medical professional bills for the service or procedure. There are some online sites that are helpful to check, but the best you’ll get is an estimation. Healthcare Bluebook allows you to search the price that private insurance companies typically pay for various services in your area.

Have you ever found out that the cash price was lower than your insurance negotiated amount for the same service or procedure? Did you hide your health insurance card to save money?