President Trump is propping up short-term health insurance plans as a lower-cost alternative to traditional health insurance, but consumers may want to think twice before buying one of these plans.
The Trump administration released a new rule Wednesday that reverses previous guidelines set by President Obama regarding short-term health insurance plans. Previously these short-term plans could only be in effect for up to 90 days — now the plans can last for up to a year, and consumers can renew them for three years. The new rule is set to go into effect in 60 days.
‘These plans are not suited for someone with a significant medical history.’
Sean Malia, senior director of carrier relations at eHealth
Short-term health insurance plans offer some benefits to consumers: For starters, these plans are in most cases cheaper than the insurance available through exchanges set up by the Affordable Care Act. “These plans are a lower cost option for those consumers who find themselves in a position where they cannot afford an ACA plan,” said Sean Malia, senior director of carrier relations at private online insurance marketplace eHealth.
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Premiums for short-term health care plans can cost as little as $25 a month in some parts of the country, according to a report released in April by the Kaiser Family Foundation. Comparatively, the average individual health insurance premium for traditional, Obamacare-compliant plans was $393 in 2017, according to a report from eHealth. A separate study from eHealth found that on average short-term health insurance premiums are 80% less than Obamacare plans.
And in many states, short-term products are more readily available. “You can apply for a short-term health plan at any time, not just during open enrollment,” said Myles Ma, editor at insurance comparison website Policygenius. “They’re also widely available, whereas Obamacare options are limited in some areas.”
But these plans have significant drawbacks that consumers need to be aware before buying. “It’s an affordable product,” Malia said. “But things are less expensive for a reason.”
Coverage can be denied for pre-existing conditions
Under the Affordable Care Act, health insurers were barred from denying coverage because of pre-existing conditions. But short-term health insurance plans aren’t subject to these same rules — and they will bar people from signing up if they have chronic health conditions or cancel their insurance if the insurer becomes aware of a previously undisclosed condition.
‘Short-term plans can price older people and less healthy people out of the market.’
Cheryl Fish-Parcham, private insurance program director at Families USA
“These plans are not suited for someone with a significant medical history,” Malia said. “If you’re somebody who had a recent stroke or cancer diagnosis, you’re not likely to pass this kind of medical underwriting.”
Even for those who do receive coverage, these insurers may use a patient’s medical history against them in determining whether a claim is approved. Take someone who had a knee replacement: If they need another surgery to that same knee, a short-term health insurer may decide it isn’t covered, Malia said. But if they injure their other knee, that typically would be covered.
These insurers can charge sick people more
Similarly, the Affordable Care Act restricted traditional insurers for charging people more based on the medical history, age or gender. But as with coverage of those with pre-existing conditions, those same restrictions don’t apply to short-term health plans.
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“Short-term plans can price older people and less healthy people out of the market,” wrote Cheryl Fish-Parcham, private insurance program director at Families USA, an organization that advocates for health-care consumers.
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These plans leave many treatments out of network
Many treatments that traditional insurers are required to cover under the Affordable Care Act are often not covered by short-term plans. For instance, no short-term plans cover maternity care, according the Kaiser Family Foundation analysis. And less than a third will provide prescription drug coverage on average.
Moreover, these plans often come with fine print that specifies what is covered in the case of an accident. “They often have long lists of limitations or exclusions for activities like horseback riding and skiing,” Ma said. “So if you get hurt doing an excluded activity, the plan won’t pay or may limit coverage to a certain dollar amount.”
The plans have ‘lifetime limits’
Traditional plans cannot limit the amount of care that is covered, but that’s not the case with short-term plans. Most have a lifetime limit, meaning they will only cover medical expenses up to a certain dollar amount for the duration of the plan. Cheaper plans have lower limits — as low as $100,000 in some cases, Malia said.
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Additionally, some short-term plans have limits on what they pay out for certain treatments. In the case of hospitalization, some of these insurers will only pay a certain dollar amount for each day of a hospital stay up to a set number of days. If the cost of a consumer’s hospital stay exceeds that amount, they will be forced to pay out of pocket.
Bottom line: Therefore, those with expensive medical conditions may want to think twice before getting one of these plans, Malia said, even if they are approved for coverage.