News Release
Consumer Complaints About Short Term Medical Insurance
2/11/08 - Some years ago short term medical (STM) was considered a "problem free" area of insurance. The coverage was simple and easy to understand and there were few "grey areas" that could lead to consumer disputes. All of that has changed. All short term medical insurance plans now report a "higher than average" consumer complaint ratio, according to the National Association of Insurance Commissioners (NAIC). Some otherwise reputable plans have comsumer complaint more than a hundred times more than the NAIC considers "normal" for all types of insurance. The NAIC collects data consumer complaints about all types of insurance and publishes part of this data in summary form on its Web site. While it is not really meaningful to compare the complaint ratio on an STM policy to other types of insurance, it still provides some sort of benchmark to observe consumer trends over a few years.
The product offered has remained substantially the same for decades, so why the sharp increase in complaints? The answer probably lies in the method of sales and enrollment. Years ago most applicants had personal contact with an insurance agent who advised on the limitations and suitability of coverage. Today most people enroll online with no human contact. Without this extra advice, there is more likelihood that some people confuse the provisions of this coverage with rules for other types of health insurance. Even in the early days of online enrollment, firms like MedSave.com reported that most buyers made personal contact by phone or e-mail prior to enrollment. That is no longer the case. Less than one in ten online health insurance buyers seeks any type of personal assistance, even when easily available and offered free of charge.
For example, assume that an applicant has diabetes. The applicant reads in their local newspapers and state insurance department Web site that all health insurance companies in their state of residence are required to accept diabetics and pay for diabetic supplies under these specific state laws. So that applicant assumes that any insurance they find is suitable an enrolls in the least expensive insurance available - almost always a short term medial insurance policy - and then finds that diabetes is not a covered item under STM insurance. No one informed the applicant that in order to keep short term medical insurance inexpensive, it is granted a legal exemption from the laws that require this coverage in other health insurance plans.
With today's complex maze of state and federal health insurance laws, there is simply no way for a consumer to know which laws apply and which do not in every instance.
Another problem is that the policy is based on the statements of the consumer without independent verification. For example, if an applicant writes a birth date that indicating age 64 and eligible for coverage, then the insurance is issued. If after a claim it is determined that the applicant was too old to qualify (over age 65) then the policy is rescinded. It might have been an unintentional error on the part of the applicant which could have been prevented by an independent verification (showing proof of age).
To their credit, insurance companies are taking additional steps to communicate the limitations of short term medical insurance. Most policies issued today have bold lettering on the top page warning about the coverage limitations. Yet it is impossible to completely to eliminate confusions and it is fair to say that even a more careful reading of the policy and disclosures would not help to clarify the thinking of some policyholders. To some extent, there is always a "buyer beware" aspect in any consumer product purchase.
To a lesser extent, some consumers are using short term medical insurance to vent their frustrations with the current state of health care in the United States. Some applicants firmly believe that equal medical coverage is a fundamental right to be provided to all regardless of prior medical history. The easy availability of short term medical insurance online, especially without the need to address a human in person, makes it easier for some to enroll without giving truthful answers on the application. They later claim that it unfair that they are being discriminated against due to their prior health history. While their position may have merit, it will not help them overcome a complaint about their short term medical insurance policy.
We firmly believe that the best way to avoid problems is to communicate with an independent adviser prior to enrollment in any policy. We are pleased to be affiliated with OnlineAdviser service at MedSave.com that handles questions about any type of health insurance free of charge be e-mail. Since the advisers have substantial experience in this field but do not work for any specific insurance company, you can be assured of unbiased advice. This type of independent professional assessment can go a long way toward helping consumers get the best deal in each situation and avoid nasty surprises later.