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The Viability of Short-Term Health Insurance

With recent rule changes enacted by the Trump administration, short-term health insurance has become an increasingly viable option for those seeking an escape from high Affordable Care Act (ACA) premiums.
Though these changes were put in place to benefit blue-collar Americans struggling to meet hefty premiums, there lacks a general awareness to the changes made to healthcare law.  In addition, many doubt the viability of extended short-term health insurance plans and are unsure of how they stack up compared to more traditional healthcare packages.
In this piece, we will examine recent changes made to insurance law and weigh the risks and benefits of selecting a short-term health insurance plan.  Understanding the advantages and disadvantages of choosing a short-term health insurance plan could be critical to finding the right coverage for you and your family.
With that being said, let’s take a closer look at the subject and what it might mean for you.

In an effort to undermine existing ACA policies and provide more affordable healthcare options to the middle class, the Trump administration has initiated a series of changes to existing healthcare law.  One major change, instituted in August 2018, repealed Obama-era measures that placed limits on short-term health insurance availability.
Specifically, the Centers for Medicare and Medicaid Services (CMS) tweaked a policy of the Obama administration that shortened the length of time individuals could keep short-term health insurance to just ninety days (or around three months).  In doing so, CMS extended the amount of time individuals can keep these policies to one year.  Additionally, individuals now have the option to renew these coverage plans for two or three years.
This comes as a huge relief to millions of struggling Americans who are unable to pay soaring ACA premiums.  According to the data, the average cost of health insurance for a family of four enrolled in a traditional health care plan exceeds $1,300 per month.  This is up more than sixty percent since the enactment of the ACA.
The Trump administration, which vowed to “repeal and replace Obamacare,” promotes short-term health insurance plans as a strong alternative to traditional market plans offered under the ACA.  Though short-term health insurance plans have typically been used in “emergency” situations such as temporary loss of employment, they are now being offered as a more viable long-term solution.
The data bear this out.  According to research, the number of businesses that plan on offering short-term health insurance plans in 2019 nearly doubled after changes to existing law took effect (from 43% to 80%).  This means that large and small businesses across the US are prepping for employees to turn away from traditional ACA options.
Despite this, it’s important to understand that there are significant differences between ACA plans and what you will get under short-term health insurance plans.  Though it may seem cheaper to switch to these plans in the short term, an informed decision can only be made by weighing the pros and cons of short-term health insurance options.
As such, let’s take a look at each below.

Good to know:  Be up front about finances.  Are you short on cash?  Do you have a high insurance deductible?  Don't be embarrassed to tell your doctor or dentist.  He may be able to suggest less costly treatment options or even agree to lower fees.  "Try to negotiate the fee you pay before or at the time you make your appointment and/or offer to pay cash," suggests Ruth Linden of Tree of Life Health Advocates.  "Some physicians will agree to accept a reduced rate, if you inform them you are experiencing difficult financial circumstances." In fact, a Wall Street Journal/Harris Interactive poll found that three out of five people who negotiated with their doctors received discounts.
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There are a number of benefits for choosing short-term health insurance plans.  If you are on the fence about switching to short-term health insurance, understanding these benefits could be crucial to your next purchase.

  • Far Cheaper for Healthier Individuals

Compared with standard ACA plans, which can run even healthy individuals around $400-plus dollars every month, short-term health insurance plans average less than $100 a month, with some options being as low as $40-$50.
Of course, the amount of coverage offered depends on the price.  You obviously won’t get the same amount of coverage with even a more-expensive $100 plan as you would with an ACA option.  This is why short-term health insurance plans are being increasingly sought by healthier individuals who don’t require all the coverage mandated by the ACA.
For individuals, especially, short-term health insurance plans offer a nice way out of one-size-fits-all healthcare packages with exorbitant premiums.  It’s recommended that you look at each plan in detail to make sure you are getting the coverage you need for your individual situation.

  • Renewable

Under the law, these short-term health insurance plans are now renewable.  Individuals seeking a refuge from high ACA premiums can do so for two-to-three years under current policy.  Though this ultimately does not satisfy long-term demand, it provides a medium-range option that may prove more viable than traditional ACA plans for individuals or families who don’t qualify for government subsidies.
Most companies will allow individuals to renew existing plans without changes.  This means customers can enjoy up to three years of medical insurance with the plans they choose.

  • No Open Enrollment

Unlike traditional insurance plans, short-term insurance plans require no open enrollment.  Those seeking these plans simply need to sign up and be approved to gain nearly instant access to medical coverage.  Typically, short-term insurance plans begin coverage within one to fourteen days of being approved, whereas ACA plans can take between two and six weeks to go into effect.
Despite there being no set window period for enrollment, many short-term insurance companies opt to take part in open enrollment periods, if only to create awareness for their plans.  If you plan on participating in this year’s open enrollment, pay attention for these companies and see if their alternative plans are right for you.  If you don’t wish to wait, however, keep in mind that short-term insurance is offered year long, so you never have to worry about missing an open enrollment period.
There’s a reason that short-term health insurance plans are so cheap.  The designation “short-term” itself goes a long way into explaining why.  It’s not just the length of coverage, however, that keeps short-term health insurance rates so low.
It’s important to keep in mind that short-term plans are essentially skeletons that provide only the basics of medical coverage.  Because they are exempt from ACA mandates, these plans do not cover many essential options, which will be covered below.  For this reason, it’s important to understand what you may be missing out on if you opt for a short-term health insurance plan.

  • Most Plans Do Not Cover Pre-Existing Conditions

Unlike ACA plans, where coverage for pre-existing conditions is mandated by law, most short-term health insurance plans provide no coverage for pre-existing conditions.  This can be a deal-breaker for several who are looking to switch to cheaper options.  Many of the plans that do offer this type of coverage charge extra for security, which means individuals with pre-existing conditions would likely be paying just as much or more for coverage that covers far less.

  • No Maternity Care

For single males looking for affordable health insurance, this likely won’t make much difference.  For working mothers, however, the lack of any maternity care at all in most short term plans could be a deciding factor in the decision to stay with traditional ACA plans over short-term options.
While many without children may celebrate the low rates of short-term health insurance, the absence of maternity care does little for mothers who are struggling to afford ACA rates and are seeking other options.

  • Does Not Cover Sports-Related Injuries

Injuries that are sustained in sports-related accidents are not covered under most short-term insurance plans.  In order to keep rates down, short-term plans cover only those accidents that are not brought about by the customer.
This means that short-term plans generally do not cover injuries as a result of drug or substance abuse, either.  Instead, a majority of these plans focus on bare minimum unexpected illness or injury coverage, with some allowing for doctor’s visits and prescription coverage on some Rx drugs.

  • High Deductibles

Though premiums are substantially lower under short-term plans, the average deductible families are expected to pay is generally equivalent to those of ACA plans (averaging between $2,500 and $5,000).  In essence, this means that individuals are asked to pay the same deductible, even when less coverage is provided.
This may be a deterrent for families or those planning to make use of their medical coverage.  For healthy individuals, however, this may not be a big problem.  Many view the risks of short-term health insurance plans as a worthy tradeoff for the ever-increasing premiums of traditional market plans.

Good to know:  Each insurance provider has a formulary or list of medicines covered by the plan.  If a medicine is not on the formulary it may not be covered and you may have to endure a potential nightmare attempting to find an alternative medication.  The list of covered medicines is also often divided into tiers, which determines how much of a copay or coinsurance you may have to pay.  Make a list of your current medicines and compare it to the plan's formulary to make sure your medicines are covered and you understand the out-of-pocket costs that may be associated with them.

The Consequences
What does this new law mean for the existing healthcare market?
Essentially, the emergence of a growing short-term healthcare market could dramatically change the health insurance landscape.  For starters, with more and more individuals seeking more affordable coverage options outside of the traditional market, it could cause an even greater spike in premiums for those who are more-or-less forced into ACA options.  This means that rates for individuals with pre-existing conditions could soar, as well as general premiums for those who opt to stay within the bounds of the ACA.
This signals perhaps another big blow by the Trump administration to undermine the efforts of the prior administration.  With measures in place that have already damaged the policy at its core (such as removing the individual healthcare mandate and penalty), President Trump and his administration are adding pressure to a dire situation, potentially forcing upcoming legislation that seeks to deal with the problem.
For those hoping for a way out of ever-climbing healthcare costs, this is a bright lining and a signal that perhaps better options are on the horizon.  For others, this is seen as yet another way to decrease the effectiveness of the ACA.
What’s clear is that policy changes could prove to have a major impact on the health insurance market moving forward.  That’s why it’s important to understand which coverage options are the best for you and your family.

As short-term health insurance has become increasingly more viable (at least in the short-to-medium range), consumers have been presented with alternatives to existing market options.
But how do you know which option is best for you?
Ultimately, this decision can only be made by you and your family.  In general, however, short-term health insurance plans are still recommended as temporary coverage options.  If you have been laid off or are experiencing a gap in your medical coverage, short-term insurance may be right for you.
Still, if you are single and in good health, you may consider a short-term health plan for yourself.  This is especially true if you are finding it difficult to meet the demands of ACA premiums.  While it’s never optimal to go without coverage, it’s recommended you go with the coverage you can afford over no coverage at all.
Keep in mind that, even with the extension, short-term health insurance cannot be used as a permanent substitute to traditional market insurance.  This means that even individuals who renew these plans must come off them eventually.  Once you have used this renewal period up, you may be forced back into the market or risk losing coverage altogether.
That’s why individuals using short-term insurance are recommended to find traditional market plans that better suit them.  Having a chosen plan in place can help transition between short-term insurance and ACA insurance (assuming the legislation will still be around) when you are ready to come off.

To recap, policy changes enacted by the Centers for Medicare and Medicaid Services under the Trump administration have greatly extended the period in which individuals can maintain their short-term health insurance.  Presently, individuals are able to keep short-term insurance for a duration of one year, with the possibility of two or three renewals.  This reverses Obama-era policies that only allowed individuals to keep their short-term insurance for a set period of ninety days.
This has changed the insurance landscape by providing individuals with a more affordable option over ACA plans, which are experiencing a steady increase in premium prices.  While these plans offer economic benefits to the consumer, they are not recommended for those in need of unique or extensive medical coverage.  Depending on health and age, short-term insurance plans may not be viable options for certain consumers.
As such, individuals are recommended to view all available options when seeking an insurance plan that is right for them and their families.

Good to know:  Keep an eye on discounts.  Remember that you don't have to buy glasses or contact lenses from your optometrist or ophthalmologist.  Federal law requires them to give you a copy of your prescription so you can buy lenses anywhere you like.  Even if you don't have vision coverage, insurance providers may offer discounts on glasses or contact lenses.  If not, look elsewhere: Some Automobile Association of America policies include eyewear discounts.  Warehouse clubs and online retailers also offer deals.
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