Patients buy short-term health insurance to 'trick' the system, health plan execs say

Despite Massachusetts' efforts to better spread health insurance costs among its population with an individual mandate, health plan data suggests that 2006 legislation has been severely undermined by patients who carry insurance only when they need expensive care.

According to health plan executives, patients have learned to trick the system by purchasing short-term insurance when they need procedures such as knee replacements and fertility treatments, and then dropping coverage and resuming the arguably nominal monthly penalty after such care is received.

In 2009, 936 people signed up for coverage with Blue Cross and Blue Shield of Massachusetts for three months or less and ran up claims of more than $1,000 per month while in the plan. Their medical spending while insured was more than four times the average for consumers who buy coverage on their own and retain it in a normal fashion, according to the Boston Globe. Spending was even higher the previous year, sending the two-year price tag into the millions.

In 2009, typical short-term BCBS-MA members paid $400 in premiums and racked up over $2,200 worth of care. The penalty for not carrying insurance during the remaining months is $93 or less, which critics of the health law say is not enough to deter young, healthy patients from carrying insurance only when they need it. Penalties under the newly passed federal legislation are similarly low compared to the cost of insurance.

Although a recent proposal by Governor Deval Patrick seeks to address this problem by restricting enrollment for consumers who are buying insurance on their own to two annual periods and reinstating waiting periods for coverage of pre-existing conditions, insurers say the measures won't go far enough. Consumer advocates, on the other hand, argue that people who buy short-term insurance do so for legitimate reasons and that the full extent of the issues are unknown.

Other insurers could not produce such detailed information for short-term customers but said they have witnessed a similar pattern, according to the Globe. "These consumers come in and get their service, and then they leave because current regulations allow them to do it,'' said Todd Bailey, vice president of underwriting at Fallon Community Health Plan, the state's fourth-largest insurer.

For more information:
- check out this article in the Boston Globe
- read this post from Paul Levy on his Running a Hospital blog

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