The Trump Administration released a final rule on 8/1 that essentially reverses an Obama Administration rule that went into effect in April of 2017. This rule will once again allow insurance companies the ability to sell Short Term Medical plans for up to 364 days of duration. The Obama Administration had shortened this time frame to a max of 90 day duration. The new rule will take effect as of 10/1/18, but insurance companies are going to have to file plans with their State Regulators and have them approved before they can start offering these plans.
This new rule will have both good and bad long term consequences (in my opinion). Let’s review the good:
1. Many people that missed the open enrollment period were locked out of getting a regular plan for the year, having a Short Term plan that only lasted 90 days was risky, as if they developed a chronic condition then they most likely would not qualify, nor have that condition covered under a subsequent short term plan. The ability to get a Short Term plan for the remainder of a the calendar year allows for much greater consumer protection.
2. Short Term plans offer another viable option for some consumers, but those consumers should fit certain demographics. One example would a 62 year old couple that have no medical issues, and are making over $65,000 per year. In this years ACA market, the lowest cost plan is $1259/month for coverage, and that plan contains a $7350 deductible per person. A Short Term plan may reduce that premium by 50% or more. If that couple is only making $75,000 per year, then a $7500 reduction in premium may make a big difference for their finances.
3. Another good case for a Short Term plan would be a person that travels the country quite a bit, since most ACA qualified plans have a very localized network it is hard for that person to get covered services in other parts of the country as they would have to come home to see a doctor (except in true emergencies). Most short term plans have nationwide PPO networks, which would allow them access to doctors and hospitals all over the country.
Now let’s review some of the negatives with Short Term plans, in general they;
1. Do not cover pre-existing conditions
2. They do not cover labor/maternity
3. They do not cover mental health
4. They in general have limited medication coverage.
5. Their are more limitations than an ACA plan, as they are not required to cover all Essential Health benefits, such as free/no cost wellness exams.
In a broader scope of things, the worry about short term plans are that they have a negative impact on the ACA market. The Obama administration worried that if healthy people took advantage of year long Short Term options, then less healthy people would sign up for ACA compliant plans, thus negatively impacting that market. This is why the 3 month restriction. While I think this is a true assessment, as an agent, I don’t think that outweighs the need to re-establish these plans back to 364 days, as it helps the consumer.