One of the biggest changes that the Trump administration made to the Affordable Care Act was promoting the sale of so-called short-term health insurance plans. As the name implies, these plans are of limited duration.…
One of the biggest changes that the Trump administration made to the Affordable Care Act was promoting the sale of so-called short-term health insurance plans. As the name implies, these plans are of limited duration. They can provide coverage for as little as a few months to up to 364 days.
Short-term plans are also, on average, cheaper than full coverage that complies with the ACA’s insurance policy regulations. According to a study by the Kaiser Family Foundation, of short-term policies offered on two large online private insurance marketplaces, the cheapest short-term policies were commonly priced at 20 percent or less of the premium for the lowest-cost ACA-compliant plan in the same area.
Price is the primary enticement of these plans, but as the old adage reminds us, you get what you pay for. And in the case of short-term health insurance, you don’t actually get very much. Indeed, the drawbacks of these plans outweigh the benefits far more often than the other way around.
But there is a market for short-term coverage, says Paul Rooney, vice president of carrier relations for the online insurance broker eHealth. “For those people who experience gaps in their coverage, where they need temporary coverage because they are off their parents’ plan or between jobs, these policies can help fill the gaps,” he says. They may help those who miss signing up during the open enrollment period as well. “If you miss that window, the rules (for enrolling) are tighter now, so a short-term product can carry you through to the next open enrollment period,” Rooney says. And for those who don’t qualify for enough of a government subsidy to afford an ACA-compliant plan, this product could be a “last resort.”
“But people need to understand that there are no regulations on what (short-term plans) cover,” Rooney says. “If you can afford the (ACA-compliant) plans, that is the product to be in.”
No Protection for Pre-Existing Conditions
Since short-term plans are not governed by the rules of the ACA, insurers are not required to cover the “essential health benefits” that the ACA-compliant plans must cover by law. Thus, they can choose to cover whatever they want — or don’t want. Short-term policies are medically underwritten, the KFF reports, which means that “consumers can, and likely will, be turned down if they have pre-existing health conditions.” Applications for these policies will ask about the applicant’s health, including if she is pregnant or planning to get pregnant, of if the applicant has been diagnosed or treated for any number of health conditions, including cancer, hepatitis, mental health or substance use disorders or HIV/AIDS. “Insurers will most likely refuse to sell short-term policies to people who answer ‘yes’ to any of those questions,” the KFF says.
The plans can also drop your coverage if you are diagnosed with a health condition during your policy period. To date, only California, Hawaii, Massachusetts, New Jersey, New York and Oregon prohibit the sale of short-term health insurance policies that refuse coverage for those with pre-existing conditions, KFF says.
While short-term policies generally cover major medical benefits, which include unexpected medical expenses from an accident or hospitalization for a serious illness, there are coverage limits — and, typically, a deductible that must first be met. According to KFF, there are other coverage limits as well:
— Limits on covered doctor visits to, for example, no more than three visits per insurance period.
— Dollar limits on covered benefits, such as only $1,000 per day in the hospital. Charges above that limit will not be covered. (The average cost of a three-day hospital stay is around $30,000, according to HealthCare.gov.)
— Limits on prescription drug coverage. Some short-term policies might not cover drugs at all. They may offer a drug discount card, but the patient will have to pay the entire discounted price, with no insurance reimbursement.
— Excluded benefits, including maternity care, substance use treatment or mental health services.
Another important difference between short-term plans and ACA-compliant plans is their provider networks. Some short-term policies are “indemnity” policies, according to KFF, which means the insurer does not have its own network of preferred doctors and hospitals that have agreed to price limits with the insurer. An indemnity policy will only reimburse you up to an amount the insurer allows, and you have to make up the difference between the reimbursement and the actual charge. “This difference is called ‘ balance billing‘ and can be very expensive,” KFF warns.
The bottom line: Short-term policies may be a viable option for those stuck between better coverage options, or for younger people who expect — and hope — to remain healthy during their coverage period and won’t need much medical care. But that isn’t really what insurance is about.
“People don’t buy health insurance in case they stay healthy. Overwhelmingly, they want protection against high medical bills in the event of serious illness or injury,” Karen Pollitz, a senior fellow at the Kaiser Family Foundation, wrote in an opinion piece in the Washington Post last May. “That’s the trade-off we face. Promoting short-term policies would give people the option of buying cheaper coverage while they are healthy. But it will make coverage more expensive once they get sick.”