In 2019, Cory Dowd signed up for a short-term health plan to cover a gap in his insurance coverage. But after he received an appendectomy, he was left with $33,600 in medical bills—and his experience reveals limitations shared by many short-term insurance plans, Jenny Deam reports for ProPublica.

How Covid-19 will impact payer mix

How Dowd ended up with $33,600 in medical bills

In the spring of 2019, Dowd had just finished his time with the Peace Corps, which had provided him with insurance—but he was still about a year away from beginning a graduate program that would also offer insurance coverage.

The Biden admin extended the special open enrollment period. Here are 4 questions to watch.

To bridge the gap period, Dowd purchased a short-term insurance plan provided by Pivot Health. According to Dowd, the plan offered reasonable monthly premiums and co-pays. He wound up purchasing two plans, the first of which indicated it would cover up to $1 million in claims, while the second would cover up to $750,000 in claims.

Then, in July 2020, Dowd landed in the ED at Mather Hospital in New York with worsening abdominal pain. While at the ED, he was diagnosed with appendicitis and received a routine appendectomy.

Dowd assumed his short-term coverage would cover the cost of his surgery, Deam reports. However, Dowd then began receiving notices for overdue medical bills.

By November 2020, Dowd was informed that his insurance plan had covered just $1,682—meaning Dowd, who was by then enrolled in his graduate program, owed $33,600.  

Mather's billing office encouraged Dowd to appeal the bill. When he did, Dowd looked through his policy and found a disclaimer saying the surgical services covered were limited to "usual and customary charges, not to exceed $2,500 per surgery."

Why short-term plans can leave patients facing big financial risks

Short-term health plans, which some consumer advocates have criticized as "junk insurance," have existed for many years and are generally intended to bridge a gap in insurance coverage, Deam reports.

Radio Advisory episode: Political hype or practical change? Health policy under a unified government

These short-term plans aren't legally required to adhere to the Affordable Care Act (ACA) and often come with coverage limitations and restrictions, and unlike longer-term plans they are permitted to review patients' medical histories for preexisting conditions, Deam reports. Legally speaking, short-term health plans are required only to disclose that they aren't ACA-compliant and might not provide coverage for all expenses.

Under former President Barack Obama's administration, these plans were limited in duration to just three months, but former President Donald Trump's administration allowed them to extend for nearly a year, with the option to renew for up to three years.

The number of people buying into short-term plans has increased over the years, Deam reports. While enrollment is not authoritatively tracked, an investigation by the U.S. House Committee on Energy and Commerce last year found that a least three million people had short-term plans in 2019—a 27% increase over the previous year.

And committee chair Rep. Frank Pallone (D-N.J.) said he "would not be surprised if the numbers increased even more last year" as people lost their employer-sponsored coverage as a result of the Covid-19 pandemic.

What happened with Dowd's bills

When informed of Dowd's situation, Jeff Smedsrud, CEO of Pivot, said he was surprised and recommended Dowd appeal to Pivot, Deam reports. Smedsrud also criticized Mather for billing Dowd for the amount his insurance didn't cover.

But a Mather spokesperson contended that Pivot didn't honor its contract to pay 85% of the hospital's charges. According to the spokesperson, the hospital appealed the insurance payment and lost, and Pivot later told the hospital that Dowd was responsible for the balance.

Earlier this month, Dowd told ProPublica that he'd received an email saying Pivot would pay all but $836 of his charges. Days later, a spokesperson for Mather confirmed that a check for $32,772 had been received, and that the remaining $836 would be waived by the hospital.

Dowd said his experience has led him to believe that short-term health plans can be deceptive to consumers.

"It's one thing for a company to create a cheap plan designed to cover some basic expenses," he said. "It's another to market these plans with maximum benefits as high as $750,000. I am hard-pressed to imagine them ever getting close to those maximums with restrictions like $2,500 for a surgery."

Smedsrud, for his part, said he believes short-term plans have a place in the health insurance landscape, but he added they shouldn't be sold as or considered a replacement for more comprehensive coverage. He also acknowledged that some "bad apples" taking advantage of confused consumers did exist in the industry.

"I would not be opposed to reforms in short-term plans," he said. "Shame on all of us if some people feel tricked" (Deam, ProPublica, 5/8).