It's very important to remember that most STM plans ask underwriting questions and don't offer coverage for pre-existing conditions, so not everyone will be a candidate for STM and likely would be better served taking COBRA coverage. (COBRA continuation coverage is a temporary extension of an individual/family's prior employer health coverage, which counts as creditable coverage to offset any pre-existing condition exclusion period the insureds may need to satisfy.) Even if an STM plan isn't right for an individual because of prior medical history or a family situation, he might still reach out to you with questions, giving you an opportunity to discuss financial planning with him

In addition to financial planning leads, STM can help worksite marketing agencies get more business clients. While busy decision makers might not take the time to listen to your worksite marketing presentation, they might give you an opportunity to offer STM to their exiting employees. Once you've proven your value as a business partner, you have the opportunity to expand your business relationship to worksite products, medical insurance or other business products.

Succeed in a lost market

Many producers consider a traditional source of STM sales, the recent college graduate, obsolete now due to a provision in the PPACA that allows adult children to remain on their parent's plan until age 26. While this has increased the number of people between the ages of 18 and 26 with health coverage, this is still the age group with the highest level of uninsured members.

There are many reasons these adult children are not covered under their parents' plans. Likely the most common reason remains cost. If a parent is not insuring any other children, the premium even with employer cost-sharing can be prohibitive. Employers often pay a higher percentage of the premium for employees than they do for their dependents, so adding additional dependents can be expensive. With unemployment levels above 8 percent, some dependents don't have access to coverage because their parents are not working and don't have coverage themselves. Other reasons that dependents are not on their parents' plan include children living outside of a provider service area or the parents not adding the children in a timely manner and having to wait for open enrollment to add children onto their plan. Producers in the individual market looking for major medical leads might do well to look for young adults in this situation and work to convert them into major medical leads.

Take advantage of disruption

Major medical plans have gone through a significant period of disruption since President Obama signed the PPACA in March 2010. Many carriers now require effective dates of at least 30 days in the future for applicants without current coverage, and in many markets, child-only coverage is difficult to find.

Using STM as a coverage option while new applicants are in their waiting period for major medical coverage is a good way to help lessen the risk of a financial loss due to a claim being incurred before the plan's effective date. Additionally, since many states now have open enrollment periods for children applying for coverage without their parents, short-term can be an effective gap-filler to provide coverage until a permanent plan can be secured.

STM Trends

The STM market has morphed over the past 24 months to a market dominated by limited benefit STM products. When used in the way they were intended—to fill a temporary insurance need—these plans may be a cost effective way to secure coverage for certain individuals. But there still are many STM plans available with higher policy limits, which may be more appropriate for those who are uncomfortable with the more limited benefit policies.

The limited benefit plans often look like more comprehensive plans, so, understanding the differences amongst plans is very important. Limited plans keep prices lower than traditional STM by having policy period maximums as low as $250,000. These limited plans generally have payment caps for various conditions such as accidents and outpatient surgeries. As with any insurance products you represent, it is a good idea to request a certificate of coverage from the carrier and to thoroughly read it to minimize the chance of bad experiences at claim time.

Another trend is the return of 11-month STM policies. While the provisions of the PPACA have for the most part eliminated 12-month STM policies (by making them subject to PPACA), some carriers offer coverage for up to 11 months. This type of policy can be a good option for children who have missed open enrollment on a state plan and are waiting for the next open enrollment period.

One growing trend is the daily deductible policy. With daily deductible plans the insured has a single deductible followed by 100 percent coinsurance for covered charges. If the insured's claims for that day are less than the deductible, no benefits are paid. If they exceed the deductible the excess claims are covered at 100 percent. Daily deductible plans usually have out of pocket limits, so if an insured person is hospitalized there is a limit to the number of deductibles that they have to meet.

More and more carriers also are offering co-pays at the physician's office. Because STM plans do not have to adhere to the provisions of the PPACA, few offer coverage for preventive care. Consumers shopping for value, especially those who previously were insured on a group or individual major medical plan, expect to make a co-payment at the physician's office. This type of benefit can be attractive at the point of sale but can sometimes raise confusion at claim time. Many STM plans do not have a preferred provider network attached to them. While the client may end up making a co-payment at the physician's office, he may get balanced billed on their visit. If you opt to sell a plan with a co-payment, make sure that the client understands how the benefit works to prevent them from having a bad experience when the claim is paid.

Another rapidly growing trend is value-added features for STM policies. These can include prescription drug add-ons, bundled ancillary plans such as accident medical insurance and critical illness coverage, and discounted telephone medical consultations. Because not all STM plans include prescription drug coverage outside of the hospital, having access to discount prescription drug coverage or a supplementary prescription plan may be highly valued by the consumer. Similarly, if the plan doesn't offer a physician office co-payment, many consumers will want to use the discounted telephonic physician consultations to help lower their out of pocket cost. In the past many producers have not focused on the value added benefits because they considered them gimmicky, but for today's value-minded purchaser, this can be the difference between closing a sale and losing one.

Conclusion

Short-term medical insurance isn't right for every producer or every client. Producers should be wary of trying to make STM something it isn't, which is a permanent policy. Many carriers allow policy rewrites, and while many instances being able to rewrite a policy makes sense, it also can be risky. For most plans, every time the policy is rewritten, a new pre-existing condition limitation is imposed and new underwriting applies. That being said, there are a number of areas where STM is a good option for both the consumer and the agent. If you are looking to find more clients in 2012, having access to a good STM policy may be a home run for you.

Rick Faucher is senior vice president of individual medical division of IHC Health Solutions, a member of the IHC Group. He can be reached at [email protected].