AgileHealthInsurance Report | 2015-02-18
Study Shows Major Premium Savings for Short Term Medical Insurance as Compared to Entry-Level Obamacare Plans
Term Health Insurance has made claims of lower premiums as compared to competing individual health insurance products, first in the pre-reform market and now in the Affordable Care Act market. To determine the accuracy of these claims, AgileHealthInsurance examined the average premiums associated with the Term Health Insurance products of three companies and compared these premiums to published premium data on Affordable Care Act plans.
In order to get a representative comparison, premiums were collected for 6 different applicant profiles:
With respect to Affordable Care Act premiums, only bronze plan premiums were used. Bronze plans are the lowest premium option among standard Obamacare plans and they represent entry-level Affordable Care Act health plans.1 Bronze plans are also the Obamacare plan most commonly purchased off-exchange by consumers who do not qualify for premium subsidies.2 Since premium subsidies are dependent on a combination of both income and the portion of earnings spent on the insurance premium, subsidies for Affordable Care Act plans were not considered as part of this study.
Our study found that, for both men and women across all three age profiles, Term Health Insurance had a price advantage over entry-level Obamacare plans. Term Health Insurance premiums were 66% less expensive on average than unsubsidized Obamacare bronze plans for the same combination of applicant profiles.
|Age||Gender||Term Health Insurance Average Premium||Obamacare Bronze Plan Average Premium||Premium Difference|
Premium Comparison: Term Health Plans & Entry-Level Obamacare Plans
Applicants who were 30 years of age evidenced the greatest differences in premiums. Term Health Insurance premium quotes for nonsmoking men in this age group averaged 76% less than the average for bronze plans while women in this age group had premium quotes of 73% less.
While the size of Term Health Insurance savings decreased as applicants grew older, the Term Health Insurance plans remained substantially cheaper than bronze plans. On average, men and women at age 50 had premium quotes that were less than half the cost of competing bronze plan premium quotes.
Why Are Premiums So Different?
Why are premiums so different between Term Health Insurance and Affordable Care Act health plans? The plans themselves are very different. All Affordable Care Act plans must include 10 basic categories of health benefits, known as the Essential Health Benefits. The Essential Health Benefits include standard care such as doctor visits, hospitalization, and emergency care. but also include mental health care, maternity care, care for abuse of alcohol and drugs, etc. In comparison, Term Health Insurance has a more narrow set of benefits and there are also benefit differences among these plans. Term Health does not include benefits like maternity care and instead of offering the full prescription drug coverage of the Affordable Care Act, Term Health plans often include a a drug discount program. Additionally, Term Health Insurance does not cover pre-existing conditions and people in poor health are likely to be rejected in the application process.
The comparison between the average premiums for Term Health Insurance and unsubsidized Affordable Care Act plans revealed a significant price advantage for Term Health Insurance. This advantage needs to be contextualized by three major factors:
With these qualifications noted, the comparison of Term Health Insurance premiums to entry-level Obamacare premiums suggests that consumers who don’t qualify for Obamacare subsidies should definitely include Term Health Insurance within their evaluation of different health plan options.
AgileHealthInsurance obtained over 1,103 premium quotes for Term Health Insurance products offered by HCC Life Insurance Company, Companion Life (HII), and the IHC Group. Premium quotes were collected on February 12, 2015.
Bronze plan premium averages were taken from a study of premiums in 38 states. “Early Gov Data on 2015 Obamacare Premiums Shows Encouraging Trends But Data Incomplete.” HealthPocket.com. November 18, 2014. http://www.healthpocket.com/healthcare-research/infostat/early-trends-2015-obamacare-premiums. Last accessed February 12, 2014. It should be noted that Affordable Care Act health plan premiums do not differ for men and women who share the same age, smoking status, and region of residence.
- Bronze plans are considered entry-level Obamacare health plans because catastrophic plans have enrollee restrictions such as being younger than age 30 or having a ‘hardship exemption.’ The plans also have actuarial values lower than bronze plans. For more information on enrollee restrictions for catastrophic plans, see https://www.healthcare.gov/choose-a-plan/catastrophic-plans/. If the premiums of all Affordable Care Act plans been averaged together, from bronze plans through platinum plans, then the average premium for Affordable Care Act plans would have been higher.
- The popularity of bronze plans off-exchange is based on an eHealth analysis of over 213,000 individual and family health insurance applications submitted through eHealthInsurance.com between October 1, 2013 and March 31, 2014. "Health Insurance Price Index Report for Open Enrollment and Q1 2014." eHealth. (May 2014). pp.9-10. eHealth Health Insurance Price Index Report for Open Enrollment and Q1 2014. Last accessed February 12, 2015.
- For 2015, the government has reported that the average premium after subsidies are applied for enrollees on the federal exchange, Healthcare.gov, was $105 a month. Jayne O'Donnell. “Tax credits cut average ACA premiums to $105.” USA Today. (February 10, 2015). http://www.usatoday.com/story/news/nation/2015/02/09/average-premiums-tax-credits-obamacare/23134039/. Last accessed February 13, 2015.