Is Short-Term Insurance the Solution?

Last week, we shared a number of changes that states are looking to make to our health Short term health insurance policy on a table. care system. This week, we bring you a major change that has been proposed nationally.

Short-Term Insurance Plans

First, the U.S. Department of Health and Human Services (HHS) has released a proposed rule to allow the sale of short-term health insurance plans with coverage for any period less than 12 months.

Short-term health insurance plans are plans that only provide coverage for a certain period of time, less than a year. These plans were only intended to provide coverage for people who were between jobs or needed temporary coverage for other reasons.

These plans are not required to comply with the ACA’s consumer protections, which means that they can deny people with pre-existing conditions, can require people to complete medical questionnaires on the application, can charge people more because of an individual’s health history, and do not have to cover essential health benefits.  For example, a plan could exclude mental health care, preventive care, substance abuse treatment, or maternity care. They also are not required to have an out-of-pocket maximum, which means that people with serious medical conditions like a cancer, will pay significantly more for their medical expenses.

Because they don’t have to comply with these consumer protections, these plans are often referred to as “junk insurance.” These plans generally appear cheaper than other individual health insurance plans. The lower monthly premiums make them attractive for people who are healthier.  However, cancer is unpredictable.

The other challenge with these short-term plans, is that when they end, they do not have ‘guaranteed renewability.’  This means that an insurance company does not have to offer an individual a new policy when the term of coverage ends.  Furthermore, because these plans do not comply with the ACA, they are not creditable coverage. So when they end, it does not trigger a special enrollment period to buy a plan in the Health Insurance Marketplace. If no other coverage is available (e.g., going on a parent’s plan if they are under 26 years old), someone who has been diagnosed with cancer may have to wait for coverage until the next open enrollment period.

HHS’s previous rule from 2016, limited these short-term insurance plans to a maximum of three months. HHS is now allowing these plans to last for any time period up to 12 months, meaning that they can last up to 364 days.

Advocates have three main concerns about this change:

  1. Unsuspecting consumers who are healthier will leave the Marketplace to buy these cheaper plans, which will drive up the costs of plans in the Marketplace
  2. If these healthier individuals are diagnosed with serious medical conditions, they may find they are not adequately covered by their short-term plan and may lose access to insurance when their term ends
  3. People with pre-existing conditions won’t be able to purchase these cheaper short-term plans, which means they will be stuck in the marketplace with more expensive plans

While expanding access to these short-term plans does increase the number of options available to consumers, there is a concern that the expansion of these plans allows insurance companies to do another end run around the consumer protections laid out in the ACA, ultimately leaving consumers with less coverage and more cost.

People have until April 23, 2018, to comment on this proposed rule, and then HHS will release a final rule at some point after that. We will keep you posted. Stay tuned.