Short-Term Health Plans Aim for the Long Haul

Short-term health insurance plans may now stretch to 12 months – and beyond. Plans of this nature were limited to 90 days. For healthy individuals, this could save money. But short-term plans have short-term benefits, with limited coverage and lifetime caps.

Kaiser Health News reports:

“Insurers will again be able to sell short-term health insurance good for up to 12 months under final rules released Wednesday by the Trump administration.

This action overturns an Obama administration directive that limited such plans to 90 days. It also adds a new twist: If they wish, insurers can make the short-term plans renewable for up to three years.

The rule will ‘help increase choices for Americans faced with escalating premiums and dwindling options in the individual market,’ said James Parker, a senior adviser to Health and Human Services Secretary Alex Azar.

But the plans could also raise premiums for those who remain in the Affordable Care Act marketplace — and the short-term coverage is far more limited.

‘We make no representation that it’s equivalent coverage,’ Parker said.”

Short-term plans were not originally meant to last for more than a brief time period. These plans offered protection for those who were in between jobs. Students and others who found themselves without coverage benefited from the short-term plans. Young, healthy individuals who have no foreseeable healthcare needs can take advantage of the lower monthly payments that a short-term plan can offer. However, these plans are not for everyone.

“Short-term plans are less expensive because, unlike their ACA counterparts, which cannot bar people with preexisting health conditions, insurers selling these policies can be choosy — rejecting people with illnesses or limiting their coverage.

Short-term plans can also set annual and lifetime caps on benefits, and cover few prescription drugs.

Most exclude benefits for maternity care, preventive care, mental health services or substance abuse treatment.”

This means that if someone on a short-term plan became pregnant or diagnosed with cancer, they would have to foot the bill – a bill for thousands and thousands of dollars. Kaiser Health News quotes the Center on Health Insurance Reforms at Georgetown University on the potential costs:

“If you get cancer, your plan will not cover oncology drugs, which can cost an average of $10,000 a month” and “if you are pregnant, you will have to find another way to pay for the cost,” averaging about $32,000 for prenatal care and delivery, the center said in a recent post.

Those figures may not be the only numbers that will rise. 

“Allowing short-term plans to last longer is the latest move to change regulations issued by the Obama administration. In June, the administration released final rules on association health plans, which grants greater leeway to small businesses and sole proprietors to join together to purchase insurance that doesn’t have to meet all the ACA’s requirements, although AHP plans are more robust than short-term plans.

Those changes to Obama-era rules, and other congressional actions, are expected to impact the cost of coverage for individuals in the ACA marketplace.

Premiums for the average benchmark ACA plan rose by 34 percent this year, according to a recent Congressional Budget Office report.

Factors driving the increase include medical inflation, but the CBO also cited the administration’s decision last fall to drop payments to insurers for lowering deductibles for certain low-income policyholders.

That same report expects premiums for ACA plans to increase 15 percent next year, in part because many consumers may be less likely to buy coverage without the threat of a tax penalty. The tax bill approved last year by Congress stops this financial penalty as of 2019.”

While short-term plans going long-term will be good for some, the idea of using something meant for a short timeframe may not be feasible for 36 months. States will have the opportunity to regulate plans, since the new short-term rules do not change individual state regulatory authority.

For more on this story, visit Kaiser Health News.

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