Before you buy short-term health insurance...
Here’s another thing health care consumers need to watch out for in the midst of the proposed changes to the Affordable Care Act: The comeback of short-term health insurance policies.
Actually, they never truly went away, even though they aren’t considered a qualified health insurance option under the ACA. These plans, which provide coverage for less than a year and as little as three months, appeal to recent grads, people who are between jobs and consumers who are caught between health exchange enrollment periods.
Consumers who opt for these plans don’t fulfill the Obamacare mandatory coverage requirement and are subject to penalties. What’s more, benefits under these policies are extremely limited, often excluding preexisting conditions and other illnesses. Deductibles can be high, and dollar amount caps on coverage are common.
Because coverage is so limited, premiums are extremely low. Healthy individuals who simply want short-term catastrophic coverage in case of an accident or sudden illness have found that even with the ACA penalty, they’re still paying less than they would for coverage in an exchange.
As a result, sales of short-term policies have actually increased in recent years. To thwart that trend and avoid siphoning off consumers from the exchanges, the Obama administration passed a new rule stating that short-term policies can last no longer than three months, explained Sabrina Corlette, research professor at the Georgetown University Health Policy Institute. The rule is slated to go into effect April 1.
However, if some of the Republican proposals to replace the ACA become a reality, sales of short-term policies may increase even more. Taking away the mandate that all Americans have qualified coverage or pay a penalty may certainly boost sales.
Another jump may come from a common element of Republican replacement plans: In order to maintain coverage for preexisting conditions patients must have “continuous coverage.” In other words, your insurance cannot lapse. So patients with health issues may buy a short-term policy simply to maintain coverage, said Sandra Hunt, a principal with PwC who specializes in health care. She said people looking to find a less expensive option for COBRA coverage are especially vulnerable.
That trend has some experts worried because of the limited coverage and the fact that short-term policies don’t have to adhere to federal regulations, said Corlette. If you find yourself considering a short-term health plan in the future, keep these points in mind:
You may not get the coverage you need most. Because so many short-term plans exclude preexisting conditions, you may find you’re paying for insurance, but you’re not getting coverage for your health needs. Yes, a short-term policy may cover you if something catastrophic happens, but not if it’s related to a health issue you are already have.
Your coverage may end in the midst of treatment. If you’re diagnosed with an illness and undergo treatment, that treatment may well last longer than your insurance policy. Because short-term policies don’t fall under ACA regulations, the insurer doesn’t have to renew coverage and likely won’t.
You may not qualify for continued coverage. “With the new administration and the many proposed health law changes, it’s not clear yet what would qualify as continuous coverage and what won’t,” said Corlette. Unsuspecting consumers with health issues may buy one of these policies hoping for a less expensive way to keep coverage only to find it doesn’t count.