What are Short-Term Medical Plans?
Short-term medical plans are nothing new. They’ve been around for decades, helping provide coverage when people are between jobs or recently graduated. As the name suggests, short-term plans bridge coverage gaps for a limited time, usually six months or less. However, since the enactment of the Affordable Care Act (ACA), the duration of short-term plans has changed.
Under ACA, insurers stretched the definition of “short” term medical plans. For some policies, the coverage lasts for as long as 364 days. “Carriers were exploiting a loophole in the law that defined a health insurance plan as one that was 365 days,” said Sabrina Corlette, a research professor at Georgetown University’s Center on Health Insurance Reforms. In other words, if a plan was just shy of a year, then it would not have to comply with the ACA essential benefits.
Moreover, the government does not regulate short-term plans like they do Obamacare plans. Therefore, carriers can create policies that are both flexible in pricing and benefits. This flexibility is reminiscent of the individual health market before ACA.
However, though short-term medical sales have soared over the past few years, they do have some downsides. Unlike qualified ACA plans, short-term plans don’t necessarily cover pre-existing conditions, maternity services, or prescription drugs. Additionally, the policies usually have a coverage cap at about $1 million. Lastly, insurers don’t have to renew someone’s policy and can even deny policies to applicants who are sick. It’s because of these limitations that short-term medical plans are cheaper and thereby popular.
Since the start of Obamacare, many have gravitated towards the short-term plans. Even if it means paying the tax penalty, people don’t not want to pay for coverage that in some cases they don’t even need. Now that premiums and deductibles have soared during this last open enrollment, short-term plans are even more popular. In some cases, paying both the penalty and the premium for the short-term plan would be cheaper than an Obamacare plan. More so than the cost, people grew frustrated with the limited networks on the marketplace. They wanted to be able to see their doctors. With short-term plans, they can see their doctors.
Sales for short-term plans may increase even more as Trump and Congress work to undo ACA’s coverage requirements and possibly remove the individual mandate.
Obama’s Attempt to Regulate the Duration of Short-Term Plans
In October of last year, the Obama administration issued one last regulatory act to restrict short-term plans to three months or less. Limiting the duration would make short-term plans a less suitable replacement for Obamacare plans. If the regulation goes into effect April 1st, short-term policy holders can request a renewal. However, insurers can deny the request. Both insurers and individuals hope the rule is revised or rescinded by Trump’s administration.
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