NEW YORK Oct 8 A key question lingers for the millions of uninsured Americans who are expected to sign up for health insurance on the new state exchanges in the next few weeks: What do they do until Jan. 1 when the coverage starts?
One option is short-term health insurance - the kind of restrictive coverage that healthcare reform is attempting to upgrade. In contrast to the policies on the state exchanges, short-term policies do not cover pre-existing conditions, applicants can be turned down for any reason, and coverage does not have to meet any minimum government standards.
Short-term policies offer coverage periods of up to six or 12 months, depending on state regulations, and applicants face stringent underwriting procedures. Short-term insurance is often used by people between jobs who are trying to avoid costly COBRA policies, which provide continued insurance after a worker leaves a company, and those waiting for workplace, Medicare, Medicaid and other benefits to kick in. Short-term policies also attract foreign students and workers who are in the United States legally but not covered by insurance from home.
For example, at the University of California at Berkeley, a few students typically need gap coverage, as the university requires everyone to be insured, says public information officer Kim Jarboe LaPean. It's usually foreign students who come to campus a few weeks before the academic year begins, and summer students who aren't otherwise covered, she notes.
Overall, 2 million short-term insurance policies are written annually across the industry, according to Bob Hurley, a senior vice president at eHealth, which runs the private health insurance marketplace eHealthinsurance.com.
Last quarter, Health Insurance Innovations Inc processed about 59,000 short-term policies, including major medical, dental and vision plans, says Mike Kosloske, chief executive officer of the Tampa, Florida-based firm.
The average single person buying a standard product pays about $70 per month for a plan that charges a $50 co-pay for a visit to the doctor, Kosloske says. By contrast, the average COBRA payment is roughly $490 per month, based on data from the Kaiser Family Foundation.
Other short-term policy providers include major carriers like Wellpoint Inc's regional Blue Cross Blue Shield providers, UnitedHealthgroup Inc's Golden Rule division, and Assurant Inc. These public companies do not break out the portion of their sales that are short-term policies.
Analysts do not yet know how much of the current market for short-term insurance will exist after Jan. 1 as people sign up for more permanent coverage.
"You could get something better on the exchanges," says Gary Claxton, a vice president of the Kaiser Family Foundation, which studies healthcare reform. "You could sign up for a policy and cancel it if you don't need it anymore."
But there still may be a market for short-term coverage among those who only need gaps filled, Claxton says. For people who are healthy enough to pass the underwriting standards of these policies - who do not have diabetes, cancer, AIDS, heart disease or even a broken wrist with a cast that needs to come off - the premiums would be cheaper than the least expensive plans on the exchanges.
"We do believe there will be a viable market going forward - it will always fill the gap role," adds eHealth's Hurley, who plans to keep listing short-term policies on eHealthInsurance.com.
Health Insurance Innovations' Kosloske is forecasting 300 percent growth in short-term policies in 2014. His analysis is based on the fact that under healthcare reform, companies with fewer than 50 employees are not required to provide coverage. If many of these employers drop coverage so that their workers can get subsidies on the exchanges, more people will end up on the market with waiting periods for coverage.
He expects a jump in the number of people taking out policies for just a few days rather than signing up for COBRA.
"It is an affordable alternative," Kosloske says.