Temporary health insurance plans may seem like an attractive solution if you’re between jobs, waiting for Medicare eligibility or self-employed, but it’s essential that you understand their limitations, such as medical underwriting and preexisting condition exclusions.
Even though new federal rules allow short-term plans with initial terms and renewals up to one year, many states limit or prohibit these policies.
Renewal Periods
Short-term health plans typically provide coverage for limited durations and may or may not be renewable, making renewal an uphill climb. To maintain coverage after your plan term ends, reapplying with medical underwriting (except in states that prohibit their sale ). Unfortunately, short-term plans don’t comply with the Affordable Care Act’s essential benefit requirements or prohibition on medical underwriting; applicants with preexisting health conditions could likely be denied coverage due to these plans’ noncompliance.
Short-term policies known as PPO provide access to a network of providers. You will need to visit in-network doctors and hospitals for maximum benefit from the policy, while indemnity plans reimburse a set amount per service rendered but you are responsible for any variance between this amount and what providers charge you directly.
HHS regulations passed in 2018 have allowed short-term policies lasting more than 364 days to be renewed for up to three years, overturning Obama administration rules that limited duration to 90 days with no renewal options. Unfortunately, unlike ACA-compliant marketplace plans, short-term policies don’t fulfill individual mandate and you could face a tax penalty should your coverage end during the year.
Reversing of the previous limit allowed insurers to offer short-term plans as an inexpensive alternative to comprehensive coverage; however, these plans are not subject to the same oversight as ACA marketplace plans and do not have to comply with consumer safeguards and minimum essential benefits requirements of the Affordable Care Act (ACA).
Some states have outright banned short-term plans while others have passed laws forcing insurers to stop selling them. Still, the Trump administration has made efforts to make it easier to purchase short-term plans; some states have even passed regulations prohibiting insurers from selling them at all. It’s possible that federal rules could change regarding short-term plans as well, though such action would likely take years of rulemaking process before having any impact until sometime around late 2023 at best.
Expiration Dates
Short-term health insurance policies are intended to be temporary solutions, covering only for a certain number of months at any given time. They’re ideal for people needing coverage while searching for jobs or waiting for employer benefits to kick in; but it should be remembered that such plans shouldn’t replace year-round comprehensive coverage.
Short-term health policies usually last only several months at most before renewal – in some states this period can extend further; federal regulations stipulate a maximum contract length of 36 months for such coverage.
Federal regulations previously prohibited short-term plans from going beyond three months and serving as replacements for traditional major medical coverage, but under President Donald Trump these limits have been lifted, making it possible for consumers to purchase unlimited short-term plans – whether or not that’s wise depends on individual circumstances and preferences.
Short-term plans often exclude prescription drug coverage or require you to renew every three months with the same premium payment, risking losing it if payments are late or you reapply while still sick. It’s also important to keep in mind that such plans don’t meet ACA compliance and thus don’t meet essential coverage requirements set out by this act.
Since short-term plans do not meet Minimum Eligibility Criteria (MEC), losing them midyear won’t qualify you for a special enrollment period to purchase an ACA-compliant individual plan. However, if your job-based or family plan terminates midyear you could possibly be eligible for COBRA continuation coverage (mini-COBRA).
Interested in purchasing a short-term plan? Start by reviewing your insurer’s application process and terms & conditions. Be prepared to provide accurate health history data and answer questions regarding any preexisting conditions you might have. If denied an individual short-term policy, try again during open enrollment period for traditional policies instead if applicable; in certain situations long-term policies might also offer greater flexibility depending on individual situations & preferences.
Pre-Existing Condition Exclusions
Short-term plans sold today don’t usually provide comprehensive coverage; rather, these policies are meant to fill temporary coverage gaps such as between jobs or during an employer-sponsored group health plan’s waiting period. Therefore, these types of policies don’t need to adhere to Affordable Care Act regulations; meaning that medical underwriting practices, preexisting condition exclusion and lifetime and annual dollar limits remain possible under their regulations.
These limitations are frequently justified by citing lower premium costs compared to Affordable Care Act-compliant options, yet this comparison is misleading; it overlooks the fact that ACA-compliant plans provide far more extensive coverage than short-term ones; for instance, under the ACA all major medical health insurance must cover preventive care, emergency services, hospitalization and prescription drugs without incurring deductible or coinsurance fees and may even allow individuals to gain comprehensive health coverage at no monthly cost by qualifying for government subsidies.
Short-term plans do not have to comply with these requirements and so they have two ways of restricting pre-existing condition coverage: either by denying coverage to people who already have pre-existing conditions, or excluding these conditions from coverage they do offer. By restricting themselves only to healthy individuals, these plans can offer much more affordable premiums than an ACA-compliant health plan – estimated savings include 38% when pre-existing condition coverage is excluded (even before accounting for savings from eliminating prescription drug coverage).
As such, it is unlikely you will find short-term health insurance to meet the pre-existing condition needs. However, you may still purchase other forms of non-ACA compliant coverage such as health care sharing ministry plans, fixed indemnity policies or travel medical coverage; should the Affordable Care Act ever be repealed these may become more popular to fill gaps left by canceled ACA policies.
Coverage Limits
As its name implies, short-term health insurance exists to fill gaps in coverage. It should not be seen as a replacement for comprehensive major medical or the minimum essential coverage (MEC) mandated by the Affordable Care Act (ACA), so these plans usually feature lower cost-sharing requirements and do not offer benefits such as prescription drug coverage, dental coverage, mental/substance use services and vision care coverage.
As such, many people enroll in short-term health plans as a temporary measure for healthcare needs. When their coverage expires they may purchase another plan and extend it again (though federal rules limit this duration to 36 months). However, any new policies subject to medical underwriting would still not cover preexisting conditions present when first purchasing their plan.
Since 2018, when the Trump Administration expanded access to short-term health plans with renewal periods of three years or less, these policies have become popular among individuals who do not qualify for Affordable Care Act Marketplace subsidies or wish to avoid paying the individual mandate tax penalty. Unfortunately, such plans lack consumer protections and regulations found within ACA-compliant health plans, potentially leaving enrollees exposed to significant medical bills should health issues arise during coverage and are unprepared to pay these expenses.
State laws and insurers’ own policies dictate if short-term plans can be sold in your region. Some states forbid them outright while others establish regulations making them harder for insurers to offer them.
To locate a short-term plan, it will require filling out an application. This form will gather details about you and any dependents as well as any conditions or injuries that you have. Payment details must also be provided along with confirmation that you understand its terms before submitting. In some instances, additional coverage such as vision or dental care could be added onto this policy.
