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Should I be leery of short-term health insurance?

Q: Should I be leery of short-term health insurance plans?

A: Short-term health insurance plans can be a relatively inexpensive option for individuals who need temporary coverage. And outside of the Obamacare annual open enrollment window, people without a qualifying event have very few options for purchasing new health coverage; in general, short-term insurance will be their best choice.

But think of the policies as a last resort – a safety net that could spare you huge medical bills from unforeseen ailments or injuries. If at all possible, a better option is to enroll in an ACA-compliant plan (either on or off the exchange) during open enrollment or during a special enrollment period triggered by a qualifying event.

Here are some factors you should definitely consider before you buy short-term health insurance:

  1. The policies are not required to cover the ACA’s essential health benefits.  They typically don’t cover routine office visits, maternity, mental health, preventative care or pre-existing conditions.
  2. Although the ACA has largely done away with medical underwriting for health insurance, short-term plans are not regulated by the ACA and they still ask some basic medical history questions in order to determine an applicant’s eligibility for coverage.  But that also means that short-term policies are available year-round, which is not the case for ACA-compliant individual major medical plans.
  3. You may need pre-certification for many medical services. You also need to check whether your policy’s deductible is payable only once, not for each illness or accident.
  4. Short-term policies have limited durations. New federal regulations (enforced as of April 1, 2017) limit short-term plans to less than three months in duration (90 days), and although you may be able to apply for another short-term plan when the first one ends, there’s no guarantee you’ll medically qualify for a second policy. The Trump Administration has proposed doing away with the three-month cap and reverting to the pre-2017 definition of short-term insurance, which was a plan that lasts no more than 364 days. But by their very nature, short-term plans will always have limited durations, which means you’ll eventually need to obtain other coverage.
  5. Use of the insurance for an accident or illness may be cited as a pre-existing condition when you apply for another temporary policy – and that could result in denial of coverage (ACA compliant plans can’t deny you during open enrollment or a special enrollment period, but if you’re applying for another short-term plan, you can be denied coverage)
  6. These policies are not considered minimum essential coverage under the ACA, which means that the termination of a short-term policy is not a qualifying event that triggers an open enrollment period for an ACA-compliant plan.  It also means that you’ll be subject to the ACA’s individual mandate penalty if you rely on a short-term plan instead of obtaining minimum essential coverage (you can have a gap in coverage of less than three months — during which you can have a short-term plan if you choose — without being subject to the penalty). The penalty is still in place in 2018, although it will be repealed as of 2019 under the GOP tax bill that was enacted in 2017.
  7. Since short-term plans are not regulated by the ACA, they can still have annual and lifetime benefit maximums.

Read more about temporary health insurance.

Louise Norris is an individual health insurance broker who has been writing about health insurance and health reform since 2006. She has written dozens of opinions and educational pieces about the Affordable Care Act for healthinsurance.org. Her state health exchange updates are regularly cited by media who cover health reform and by other health insurance experts.