Short-term health insurance plans: What you need to know
The Trump administration this week released the final rule on short-term health insurance plans that are a cheaper alternative to buying individual insurance on the Obamacare exchange but usually offer far less comprehensive coverage.
The rule comes just weeks after the administration broadened the reach of association health plans, another type of health plan that skirts coverage mandates established by the Affordable Care Act.
The one-two punch is seen by the White House as providing more affordable options than consumers can find on the ACA exchanges. "From 2013 to 2017 insurance premiums more than doubled under the Affordable Care Act, shutting out tons of middle-class Americans who don't get subsidies," according to a White House press release.
For instance, a standard silver plan under the ACA now averages $481 a month for a 40-year-old nonsmoker. A short-term plan might cost as little as $160 a month, according to some estimates.
But lower premiums may be deceptive, says Karen Pollitz senior fellow, health reform and private insurance at the Kaiser Family Foundation. "Cheap insurance is cheap for a reason," says Pollitz, referring to both short-term and association health plans. "These plans are less expensive because they are offering you less protection."
Here's a closer look at the limitations of short-term health plans and what you need to watch out for.
Extended timing. Under Obamacare, short-term plans could only be sold for a coverage period of 90 days. That seemed a reasonable amount of time to offer bare bones coverage for people who are in between jobs or in another short-term bind.
Under the new rules, a short-term policy can be issued for a limit of 364 days and insurers are allowed to extend those policies up to 36 months, or a total of three years. Three years is not exactly short term, according to many health care advocates. Over a period of time that long, chances are higher a healthy person who signed up for a minimal plan may encounter health issues that could potentially be excluded from coverage.
Skimpier coverage. Short-term plans are not required to provide coverage for the "10 essential health benefits" other insurers must cover under the Affordable Care Act. For instance, according to Kaiser Family Foundation data, only a fraction of short-term plans covered prenatal and maternity care, mental health care, drug treatment or prescription drugs.
Other short-term plans may limit coverage even more. Some may not cover hospitalization, for example, or if they do, they may only pay $100 per day for 10 days, far less than an actual hospitalization would likely cost. Or, buried in the policy may be exemptions for other coverage, such as any injury sustained while the policy holder is intoxicated or injuries sustained while playing organized sports, according to health advocacy group Families USA. Deductibles and other out-of-pocket costs can also be higher in short-term plans than policies found on the individual market.
Less coverage for pre-existing conditions. The requirement that insurers must provide coverage to people with preexisting conditions, at the same price as healthy people, is one of the most popular aspects of the Affordable Care Act, even among members of Congress who have sought to repeal Obamacare. But short-term plans are exempt from the pre-existing condition rule. They can refuse an applicant with a health condition or offer a policy that does not cover the condition specifically.
Short-term plans have been known to play fast and loose with the pre-existing loophole in the fine print. Some policies deny coverage for minor health conditions such as allergies or even if a patient had symptoms of a health condition but didn't seek treatment, according to Families USA.
The siphoning effect. As with association plans, health care advocates worry that inexpensive short-term plans will siphon off healthier patients who feel confident they don't need comprehensive coverage or who can't afford full policies. That will leave individual and exchange insurers covering sicker, more costly patients without the benefit of healthier patients in the insurance-risk pool. The result may be much higher premiums for ACA-compliant health plans.
Small business coverage. This siphoning effect may hit small business owners and employees particularly hard, said John Arensmeyer, CEO of the Small Business Majority, a liberal advocacy organization. The Trump administration estimated that as many as 1.6 million people will purchase short-term plans by 2022. Arensmeyer predicted nearly all of these people will be younger and healthier. Small businesses have come to rely on the exchanges, he explained. When you create an unbalanced risk pool that can destabilize the exchanges, and so small business owners and employees will have to pay more for comprehensive plans or be tempted to buy cheaper plans with inadequate coverage, Arensmeyer said.