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.
(Note that the rules are different in 2021, because of the COVID pandemic and the additional premium subsidies available under the American Rescue Plan. There’s a one-time enrollment window in 2021 that continues through August 15 in most states, giving people a chance to obtain ACA-compliant coverage for several months after the open enrollment window ended. This COVID/ARP enrollment window does not require a qualifying event, and people in most states can use it to newly enroll or switch from one exchange plan to another.)
But in normal years, think of short-term 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:
- 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. (Some states have stricter rules on this, and do require short-term plans to cover at least several of the essential health benefits. Iowa is an example, and North Dakota has essential health benefit requirements for association short-term plans.)
- 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. And post-claims underwriting is widely used for short-term health plans. But that also means that short-term policies are available year-round, which is not the case for ACA-compliant individual major medical plans.
- You may need pre-certification for many medical services. You also need to check whether your policy’s deductible is payable only once, or for each medial incident.
- Short-term policies have limited durations. The Trump Administration finalized new rules in August 2018 that allow short-term plans to be sold with initial terms of up to 364 days. Carriers also have the option to offer renewals, as long as a single plan doesn’t extend for more than 36 months. But some states prohibit short-term plans from lasting more than three or six months, and even in other states, insurers may opt to only offer shorter short-term plans (some states prohibit short-term plans altogether, or have rules that make the short-term market unappealing to insurers).
- 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)
- 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 a special enrollment period for an ACA-compliant individual market plan.
- 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.