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 One major change, instituted in August 2018, repealed Obama-era measures that placed limits on short-term health insurance availability.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.
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.
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.
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.
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.
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.
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.
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.