Short-Term Health Plans: A Costly Surprise for One Consumer
When Tim Winard left his management job to start his own business, he knew he needed health insurance. It was the first time the Illinois resident had shopped for coverage. He sought a plan that would cover both himself and his wife, who was also between jobs. “We were so nervous about not being on a company-provided plan,” Winard recalls.
After consulting with an insurance agent, Winard decided against an Affordable Care Act (ACA) plan, citing cost concerns. Instead, he opted for a short-term policy, effective for six months. When he needed a colonoscopy, the limitations of his short-term plan came to light, leaving Winard with a hefty bill.
The Colonoscopy and the Unexpected Bill
Winard, 57, contacted his insurer about having a colonoscopy. The representative told him to go to any facility. He chose a hospital in Elmhurst, Illinois, not far from his home. The procedure went smoothly, but the bill that followed was a shock. The final bill totaled over $10,723, including charges for anesthesia and recovery. After an insurance discount, his plan paid just over $800, leaving Winward owing over $7,000.
The Problem with Short-Term Plans
Short-term, limited-duration insurance policies are not required to adhere to the rules established under the ACA, as they are meant to be temporary coverage. This means that the benefits within these plans can vary widely, sometimes imposing specific dollar caps on certain types of medical care, which can fall far short of actual costs.
What is covered can be difficult to understand, and the insurer often has the final say interpreting its rules. Limits in short-term plans can come as a surprise to people accustomed to work-based or ACA plans. Most plans screen applicants for health conditions and may reject them or exclude those conditions. They frequently do not include drug coverage or maternity care. The limitations on services, conditions, and patients are why short-term plans are often less expensive than unsubsidized ACA plans.
“The general trade-off is lower premiums versus what the plans actually cover,” said Cynthia Cox, vice president and director of the program on the ACA at KFF, a health information nonprofit that includes KFF Health News. “But the reason short-term plans are priced lower than a more comprehensive ACA plan is that they can deny people with preexisting conditions and don’t have to cover a lot of essential health benefits.”
How the Bill’s Details Evolved
Winard was stunned to discover he owed more than $7,000 for his colonoscopy and contacted his insurance provider. They classified the procedure and all related costs under the policy’s “outpatient surgery facility” benefit. The benefit’s cap, according to the email, was $1,000 per day.
Winard interpreted the policy’s terms differently. He believed the cap was on the facility itself, not encompassing all services. Even though his plan covered 80% of the screening costs after his deductible, and 80% of the outpatient drugs, he still thought he would only pay 20%. Furthermore, Winard questioned the insurer’s categorization of the screening at Endeavor Health Elmhurst Hospital as an “outpatient” procedure.
Winard’s insurer stated that the $1,000-a-day limit applied to treatment and services in an ambulatory surgery center not part of a hospital, or a hospital outpatient surgery facility. Hospital spokesperson Allie Burke clarified that the hospital has a building where same-day outpatient procedures like colonoscopies are performed.
The Resolution and the Takeaway
In December, Winard hired an advocate to help him decipher the bill. They offered the hospital $4,000 to settle the bill, an amount his advocate estimated to be four times what Medicare would pay for a colonoscopy. The hospital declined. However, following inquiries from KFF Health News, Winard was contacted by his insurer, who told him the bill had been adjusted to just over $700, without specific explanation.
Short-term plans can appear appealing due to their lower premiums; however, consumers should carefully review all plan documents before enrolling. It’s essential to understand what a plan covers and excludes. Moreover, people need to determine whether a plan has per-day or per-policy-period limits. The federal government offers subsidies for ACA plans based on household income, which can make them similarly priced to short-term plans, but with a greater range of benefits.
In retrospect, Winard admits he didn’t fully understand the differences between ACA policies and short-term plans. His advice? Don’t just rely on marketing materials, and always get a cost estimate, preferably in writing, before a nonemergency procedure like a colonoscopy.
This article was reprinted from khn.org, a national newsroom that produces in-depth journalism about health issues and is one of the core operating programs at KFF – the independent source for health policy research, polling, and journalism.
