Introduction
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.
Backdrop
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 One major change, instituted in August 2018, repealed Obama-era measures that placed limits on short-term health insurance availability.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.
Benefits
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.
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.
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.
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.
Other articles:
Resources
We are pleased to assist and will respond promptly.