YOUR MONEY-An option for those facing insurance gap

Reuters

(In the 13th paragraph, clarifies that growth is in overallindividual market, not just short-term policies.)

By Beth Pinsker

NEW YORK, Oct 8 (Reuters) - A key question lingers for themillions of uninsured Americans who are expected to sign up forhealth insurance on the new state exchanges in the next fewweeks: What do they do until Jan. 1 when the coverage starts?

One option is short-term health insurance - the kind ofrestrictive coverage that healthcare reform is attempting toupgrade. 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 doesnot have to meet any minimum government standards.

Short-term policies offer coverage periods of up to six or12 months, depending on state regulations, and applicants facestringent underwriting procedures. Short-term insurance is oftenused by people between jobs who are trying to avoid costly COBRApolicies, which provide continued insurance after a workerleaves a company, and those waiting for workplace, Medicare,Medicaid and other benefits to kick in. Short-term policies alsoattract foreign students and workers who are in the UnitedStates legally but not covered by insurance from home.

For example, at the University of California at Berkeley, afew students typically need gap coverage, as the universityrequires everyone to be insured, says public information officerKim Jarboe LaPean. It's usually foreign students who come tocampus a few weeks before the academic year begins, and summerstudents who aren't otherwise covered, she notes.

Overall, 2 million short-term insurance policies are writtenannually across the industry, according to Bob Hurley, a seniorvice president at eHealth, which runs the privatehealth insurance marketplace eHealthinsurance.com.

Last quarter, Health Insurance Innovations Inc processed about 59,000 short-term policies, including majormedical, dental and vision plans, says Mike Kosloske, chiefexecutive officer of the Tampa, Florida-based firm.

The average single person buying a standard product paysabout $70 per month for a plan that charges a $50 co-pay for avisit to the doctor, Kosloske says. By contrast, the averageCOBRA payment is roughly $490 per month, based on data from theKaiser Family Foundation.

Other short-term policy providers include major carrierslike Wellpoint Inc's regional Blue Cross Blue Shieldproviders, UnitedHealthgroup Inc's Golden Rule division,and Assurant Inc. These public companies do not breakout the portion of their sales that are short-term policies.

Analysts do not yet know how much of the current market forshort-term insurance will exist after Jan. 1 as people sign upfor more permanent coverage.

"You could get something better on the exchanges," says GaryClaxton, a vice president of the Kaiser Family Foundation, whichstudies healthcare reform. "You could sign up for a policy andcancel it if you don't need it anymore."

But there still may be a market for short-term coverageamong those who only need gaps filled, Claxton says. For peoplewho are healthy enough to pass the underwriting standards ofthese policies - who do not have diabetes, cancer, AIDS, heartdisease or even a broken wrist with a cast that needs to comeoff - the premiums would be cheaper than the least expensiveplans 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, whoplans to keep listing short-term policies oneHealthInsurance.com.

Health Insurance Innovations' Kosloske is forecasting 300percent growth in individual insurance policies beginning in2014, including short-term ones. His analysis is based on thefact that under healthcare reform, companies with fewer than 50employees are not required to provide coverage. If many of theseemployers drop coverage so that their workers can get subsidieson the exchanges, more people will end up on the market withwaiting periods for coverage.

He expects a jump in the number of people taking outpolicies for just a few days rather than signing up for COBRA.

"It is an affordable alternative," Kosloske says. (Follow us @ReutersMoney or at http://www.reuters.com/finance/personal-finance; Editing by Lauren Young, John Wallace and Kenneth Barry)

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