The Way New Regulation Profoundly Changes Short Term Health Insurance Policies in 2019
For over 30 years, Short term health insurance has provided coverage for a defined period of time and generally includes a much lower premium than other types of major medical coverage.
Until April of 2017, the coverage period was determined by state law, with the majority of states permitting terms of 364 days or less.
However, the outgoing Obama administration made a significant change, issuing a regulatory final rule which cut the maximum duration term limit of short term health insurance from 12 to less than three months.
However, this limit was changed on August 1, 2018 by another regulation designed to expand access to short term health coverage.
The rule reinstates the 364 day maximum term limit and allows carriers to offer reapply options for up to 36 months.
The changes officially took effect on October 2, 2018.
This is good for consumers seeking more health care options that fit their lifestyle and budgetary needs.
Short term health insurance policies are available year-round; there are no application blackout periods.
However, they do not cover pre-existing conditions and are better suited for those with no chronic conditions or consistent medical needs.
The new change is in response to an executive order issued on October 12, 2017 which stated, “To the extent permitted by law and supported by sound policy, the Secretaries should consider allowing such insurance to cover longer periods and be renewed by the consumer.”
Some consider this, and other executive orders and regulations, to be part of a new era of healthcare reform dubbed “Trumpcare.”
Please note that while “Obamacare” is a nickname for a real federal statute, “Trumpcare” is merely a nickname for the collective changes to U.S. health care that have been made since the Trump administration took office in 2017.
The Rule Before the New Legislative Changes
Before 2017, federal regulations limited the duration of all short term plans to 364 days or less, though some states restricted these plans to six months.
Short term health insurance plans offer major medical services in case of injury and illness, but they are not required to offer the 10 essential health benefits as defined by the ACA.
They do, however, typically cover many common benefits like doctor/specialist visits, hospitalization and emergency care, lab tests, x-rays and more.
Short term insurance coverage was originally designed to fill gaps between other forms of major medical coverage.
Many people opted for a short term plan when transitioning between jobs and losing employer-provided coverage for a set period of time. Short term health insurance also appeals to small business owners or self-employed workers who don’t have employer-provided coverage; and individuals losing coverage under their parents or spouse’s health insurance.
The 2017 restriction limiting the duration of short term health insurance plans had an unfortunate and unintended consequence--many Americans, specifically those that didn’t qualify for subsidies (or tax credits) on ACA-compliant coverage, were left to choose between paying for the ever-increasing premiums offered by ACA-compliant plans or risk going uninsured for the next year.
Legislative Changes Allow Longer Periods of Short Term Health Coverage
Now in effect, the final rule extends the duration of short term coverage from 3 months to 12 months (364 days) depending on state availability and limitations.
It also allows carriers to offer reapply options for maximum policy durations of 36 months, again depending on the discretion of states.
The new rule also requires a specific notice provision for these types of plans.
Specifically, the language in the plan must inform insureds that the plans do not comply with the Minimum Essential Coverage requirements of the Affordable Care Act.
This is important because the ACA currently issues an individual mandate penalty, which equates to 2.5% of one’s yearly household income, or $695 per adult plus $347.50 per child with a $2,085 household maximum - whichever amount is greater.
This penalty will, however, be phased out as of January 1, 2019, meaning you could find and even apply for the best short term health insurance policy for you today without the financial burden of paying the individual mandate penalty.
Options for Short Term Health Coverage
One of the most attractive aspects of short term health insurance is the cost, but many people shy away from short term plans because they are so limited.
Why is that?
When a plan is limited to three months, it may not address insurance needs fully.
Now, however, the legislative change allows individuals to take advantage of more affordable health care for up to three years.
When you apply for a short term plan, you will need to go through medical underwriting. Applications can be rejected.
Short term plans often do not cover many of the same things that ACA-compliant plans will address.
However, with the reapply option, some plans can extend up to 36 months without having to go through the underwriting process again upon each reapplication.
If an insured develops a condition during the short term health plan, the plan will cover medical related expenses for the duration of the plan, in some states up to three years.
It also helps provide additional options to families who may be facing premium increases that make other forms of major medical insurance too expensive over time.
Keep in mind, however, that some states only permit short term coverage for much shorter time periods—as little as six or even three months.
Some states also have more stringent requirements for what the plan must include to qualify as “short term health insurance.”
Some states will not permit underwriting for reapply plans, an advantage to consumers.
Other states require additional benefits such as prescription medicine.
Many states are still developing their rules for short term health insurance.
The Trump Regulation specifically states that the expansion will “expand more affordable coverage options to consumers who desire and need them, to help individuals avoid paying for benefits provided in individual health insurance coverage that they believe are not worth the cost, to reduce the number of uninsured individuals, and to make available more coverage options with broader access to providers than certain individual health insurance coverage has.”
With this rule now in place, Americans have more affordable choices than ever when it comes to finding the right health insurance for their budget.
Click below to learn more, get a quote and save on quality short-term health insurance coverage today.