In 2018, the Trump administration made some changes to short-term health insurance plans. They extended the maximum coverage period from 90 days to almost a year, with the possibility of extending it up to three years. The White House said this would help Americans struggling with high health insurance premiums. Indeed, these plans can be about 75% cheaper than full health care plans. But there’s a catch – they offer much less coverage. They don’t cover basic care like checkups, and there’s a limit on how much they’ll pay out each year, regardless of how sick you get.
So, what exactly is short-term health insurance? It’s designed to provide basic, emergency coverage when you’re between regular insurance plans. Because they’re for short-term use, they don’t have to meet the requirements of the Affordable Care Act (ACA), also known as Obamacare, for "minimum essential coverage." This means they don’t have to cover all the essential benefits, and they can set limits on how much they’ll pay out for the ones they do cover. They’re cheaper partly because they cover so little and partly because they only provide temporary coverage.
The rules for short-term coverage have changed a few times in recent years. Before 2017, federal law defined short-term insurance as plans that provided coverage for less than one year. However, some states imposed time limits of six months or less. A new rule issued by the Obama administration in early 2017 required all new short-term plans to provide health coverage for no more than 90 days. This was to stop people from relying on short-term plans as their primary source of care. However, some insurance companies got around this rule by selling consumers up to four back-to-back 90-day plans. Then, in October 2017, President Donald Trump signed an executive order directing federal agencies to revise these rules. Under the new rules, which took effect in October 2018, short-term policies can have terms of up to 364 days and can be renewed for up to three years. However, states can still set stricter limits on these plans if they choose.
There are some pros to short-term health insurance. They have lower premiums, offer flexibility in coverage, and are easy to get. You can sign up for short-term health insurance at any time during the year, and once you’re signed up, your policy can take effect as soon as the next day.
However, there are also cons. The coverage is very limited, the deductibles are high, and there are caps on coverage. Short-term health insurance plans are not ACA-compliant and are not available for sale on the health insurance marketplace. Therefore, if you choose to buy one of these short-term plans, you can’t qualify for an Obamacare subsidy. There may also be penalties for not carrying ACA-compliant insurance, and there may be gaps in coverage. Depending on where you live, a short-term plan might not even be an option for you.
Short-term health plans can also make health care more expensive for everyone else. When cheap short-term insurance is an option, young and healthy people are likely to choose these inexpensive plans rather than buying ACA-compliant plans in the health insurance marketplace. This drives up costs for insurers selling plans in the marketplace, which in turn drives up premiums, making ACA-compliant plans more expensive.
Despite all the problems with short-term health insurance, it can be useful in certain situations. It could be worth considering if you’re young and healthy, between plans, or can’t afford anything else. However, if there’s any way you can afford a real health plan, either from your workplace or the health insurance marketplace, it’s a much better choice.
The key thing to understand about short-term plans is that they’re not the same as real health insurance policies. They provide some protection for emergencies, but you can’t count on them to cover the costs of basic medical care. Unfortunately, consumers don’t always realize this. They sometimes buy the plans without reading the fine print, only to discover these plans provide almost no coverage. The new rules for short-term health plans address this problem to some extent. They require insurers to disclose that the plans aren’t ACA-compliant, don’t have to cover all essential health benefits, and can have annual or lifetime limits. However, people may still brush off this warning, assuming that because they’re young and healthy, they don’t have to worry about getting sick. The truth is that it’s almost impossible to predict what your health care costs will be. That’s why you need health insurance in the first place — to protect you against medical costs you didn’t expect. So, there’s little point in buying a short-term plan that doesn’t truly protect you.
