Sales of health insurance policies with limited benefits — plans that represent the very type of coverage and industry practices that the Affordable Care Act was designed to get rid of — appear to be on the rise.
These short-term policies, which don't include such basic benefits as prescription drugs or maternity coverage and can exclude applicants based on their medical history, are experiencing a resurgence among consumers willing to exchange comprehensive care and a potential tax penalty for significantly cheaper premiums than those sold under the rules of the federal health law many refer to as Obamacare.
"While Obamacare is appropriate for some people, for others it is not, and they want other choices," said Sam Gibbs, executive director of Agile Health Insurance, a Mountain View company that operates what it calls the first website dedicated to selling these policies exclusively.
Gibbs said the year-old business, a division of Health Insurance Innovations, has been growing 100 percent each quarter and has sold 35,000 policies nationwide since last fall.
Most people who purchase these policies do so because they need to fill a gap in health coverage and just need something to protect their assets in case of a medical emergency. They don't want the cost or hassle that comes with applying for standard health insurance.
"The reason you buy temporary insurance is so you can survive a Muni accident. ... Or if you fall off a building and live," said Kevin Sullivan, 36, of San Francisco, who bought a six-week policy when his wife, whose employers normally provide the couple's coverage, was between jobs.
He did the math: continuing coverage under his wife's former employer's policy would have cost $1,100 a month, and six weeks of a temporary policy cost just over $400. Sullivan, who runs a company that sells commercial insurance, understood the downside.
"You take the risk that you're diagnosed with cancer in the temporary period. You take the risk you're not going to get your prescriptions filled," he said.
Sullivan, who purchased the plan through Agile Health, said he didn't he even know who the carrier was. He and his wife never used the policy. Her new job-based coverage started May 1.
When the Affordable Care Act's major provisions went into effect in January 2014, many of the problems that plagued people who had to buy health insurance on their own, rather than getting as part of a group policy from a job, were supposed to go away.
No longer could people be rejected or charged more if they had pre-existing health conditions. No longer would they get hit with bills for basic services that weren't covered, even if they were informed in the fine print. In exchange for ending those practices, the law requires most Americans to buy health insurance. They have to buy coverage during a specific "open enrollment" period to prevent them from buying it only when they need it, like on the way to the hospital.
Federal numbers released Tuesday show that the Affordable Care Act has pushed the percentage of uninsured Americans to a record low of 9.1 percent, the first time it has dipped into the single digits. But there are growing concerns nationwide that insurers may seek double-digit increases in premiums next year for policies sold through the health law's insurance marketplaces.
Even the state's health insurance exchange, Covered California, which has managed to keep rate increases relatively low, is expecting premiums to rise 8 percent on average next year. This follows two years of increases averaging just 4 percent.
Short-term policies, which can last a few months or up to a year, are virtually everything the policies that comply with the Affordable Care Act are not. They require applicants to answer some basic health questions, and those with chronic or past health problems may be rejected. They don't cover basic benefits mandated by the law, and consumers aren't guaranteed of getting a policy if they reapply.
While buying health coverage that doesn't meet the new marketplace requirements is legal, people can get hit with a tax penalty if they don't have coverage and don't qualify for various exemptions. (Short gaps in coverage, for example, are accepted.)
Temporary health insurance that doesn't cover mandated benefits doesn't count under the law. The penalty started at $95 per adult in 2014, the first year the policies were sold, and will rise to $695 this year.
For Orlando Figueroa of San Leandro, the penalty wasn't high among his priorities when he opted for a short-term policy.
A father of two, the 44-year-old was laid off from his recruiting job for a major Silicon Valley tech company. While he worked as a contractor, Figueroa's family coverage could cost him as much as $1,300 a month.
While searching for options online, he learned about temporary health insurance and bought a short-term Aetna policy for about $850 a month. He considered buying a regular policy -- his change in job status allowed him to buy outside the open enrollment period -- but he didn't qualify for a subsidy through Covered California.
"This is a lot cheaper. This can help me bridge the gap," he said. "For a case like mine, it's going to cover a two- to three-month gap. Then I can weigh what I'm going to do next at the time."
Figueroa bought his plan through eHealth, a Mountain View company that sells short-term policies as well as those that comply with Affordable Care Act rules.
"The reality is, insurance doesn't do you any good if you can't afford it," said Nate Purpura, vice president of consumer affairs at eHealth.
EHealth sold about 60,000 short-term policies nationwide in 2013, the year before the major Affordable Care Act provisions went into effect, Purpura said. In 2014 and 2015, its annual sales of policies jumped to about 140,000.
"We thought maybe once people understood the enrollment period better, we'd not see quite the same appetite for short-term (policies), but the demand has stayed consistent," Purpura said.
Numbers like that pose concerns for consumer advocates like Betsy Imholz, who plans to ask state insurance commissioners to ensure that their residents understand the risks of these policies.
"I worry about people not fully understanding what they're getting," said Imholz, special projects director at Consumers Union, the policy and advocacy division of Consumer Reports.
Imholz said people should be asking about what the plan covers, what it doesn't, as well as how much of their money these companies actually spend on medical claims.
Imholz said she also worries that these policies are siphoning younger, healthier consumers out of the pool of people buying coverage.
"We need to keep the larger risk pool healthy to keep rates down for everyone else," she said.
These young, healthy consumers include people like 29-year-old Brianna Skellie, of Oakland, who lost her health insurance last fall when she finished graduate school.
Skellie said it took a bad reaction to an insect bite to remind her how much she needed coverage.
"It was such a moment of panic," she said. "It was like anything could happen to me. I ride my bike a lot and just needed to have something more than nothing."
She may have qualified for a subsidized policy through Covered California, but Skellie planned to quickly get a job and didn't want to go through proving her income and citizenship and other hassles. So she purchased a short-term plan online for less than $100 a month and dropped it a couple months later when she got a full-time job with benefits.
Officials from the California Department of Insurance said they receive reports from the insurers they regulate about these policies. They said not many of them are sold in California, and they have received few complaints.
But the companies that sell these policies remain bullish on the market.
"Obamacare has left a gap. We're entrepreneurs and innovators, so we build products to fill those gaps," Agile Health's Gibbs said. "Time will tell where this goes, but so far it's just been fantastic."
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