Millions of Americans seeking alternatives to the Affordable Care Act’s comprehensive (but in some cases cost-prohibitive) health coverage may soon be gravitating to short-term health plans, enticed by an attractive feature: coverage that they can hold on to longer.
Thanks to a recent executive order signed by President Donald Trump, individual plan buyers who are unable – or unwilling – to buy ACA-compliant plans may be getting the message that a return to “not-so-short” short-term coverage is imminent. At the same time, some health carriers are making the case that consumers can get longer coverage durations – up to 360 days – with a short-term plan right now.
A signal of increased flexibility in 2018 …
Prior to 2017, federal law had limited the duration of short-term health plans to 364 days (though some states had capped duration at six months). Short-term plans continue to be exempt from ACA rules, but Obama Administration regulations that took effect in 2017 limited the duration of short-term plans to 90 days.
In October 2017, President Trump signed an executive order directing federal agencies to draft regulations aimed at rolling back those restrictions on short-term plans. That means it’s likely that short-term plans with durations of up to 364 days will once again be allowed in the fairly near future.
The executive order gave the Secretaries of the Treasury, Labor, and Health and Human Services 60 days to consider proposing the regulations, but less than four weeks later, the proposed regulations were under review by the Office of Management and Budget. The proposal was under review as of November 6, but had not been made available to the public as of the end of November. So while we don’t yet know exactly what has been proposed, the expectation is that the Trump Administration will roll back the Obama-era regulations and return to the previous short-term market regulations.
There will eventually be a public comment period – likely 30 days long – after which the regulations could be implemented, but we may see a return to the previous regulations as soon as January 2018.
… but current rules already offer flexibility
If you’re a consumer who’s been reluctant to buy short-term plans in 2017 because of that 90-day limit, it may surprise you to know that it’s actually been possible for you to have short-term coverage for longer periods under current rules – as long as you’re willing and able to reapply for a new plan each time your coverage ends.
So for example, if you bought a short-term plan that took effect at the beginning of August, it would have a termination date at the end October. You’d be able to apply for another short-term plan in October, effective the day after your first policy terminated. Short-term plans can have effective dates as early as the day after you enroll, so they don’t require as much planning ahead as normal health insurance does. But you do still have to be healthy in order to obtain each new plan.
In some cases, however, that reapplication process isn’t always necessary. One company – Pivot Health* – allows enrollees in some states to purchase up to four 90-day plans at one time, with one application. The plans take effect one after the other, so the enrollee can have up to 360 days of short-term coverage under four separate plans, but without the need to reapply (and qualify based on medical history) every 90 days.
According to Pivot Health’s plan information, each of the four plans would have a separate deductible and out-of-pocket exposure, so your deductible would reset to zero every 90 days. But – and this is where there’s a significant advantage to being able to purchase up to four plans at once – enrollees would only have to qualify medically during the initial application, and medical conditions that arise during one of the initial plans would continue to be covered under the subsequent plans in accordance with the terms of the policy.
Exciting news … for some buyers
Having the option of stretching short-term coverage over a full year will undoubtedly be welcome news to consumers who already feel as though the coverage is their only viable option.
These buyers include individuals and families who are trapped in the Medicaid coverage gap because their states have rejected federal funding to expand the ACA – but they also include people who are healthy and who earn just a little bit too much to qualify for premium subsidies. Learn about those who lose subsidies due to ACA’s subsidy cliff.
And some of these folks earn less than 400 percent of the poverty level but are denied subsidies due to the family glitch.
But if you’re eligible for premium subsidies in the exchange (or even if you’re not but you feel like you can still manage the cost of a regular plan), an ACA-compliant plan will be your best choice. If you’re eligible for premium subsidies, you might find that you can get ACA-compliant coverage in the exchange for much less than you expect in terms of after-subsidy premiums, due to fact that silver plan rates for 2018 are increasing by much more than rates at other metal levels in most states, resulting in much larger premium subsidies (here’s an example of how this works in Alabama, but similar scenarios apply in most states for 2018).
Plan pitfalls to consider
Plan buyers should be aware that there are potential down-side to the back-to-back short-term approach:
- If you purchase multiple short-term plans at once and you develop a medical condition during the time that you’re covered under one of the plans, you’ll likely need to purchase ACA-compliant coverage during the next open enrollment period. Your condition would be considered pre-existing if and when you were to apply for another short-term plan after your pre-purchased series of plans ends. (But the ability to maintain multiple short-term plans that provide up to 360 days of coverage will see you through to the next open enrollment period in most cases, depending on when you first apply.)
- Having the deductible reset to zero after each 90 days (as opposed to once per year on an ACA-compliant plan) could end up being quite costly, so this is something to keep in mind. But it’s still far less expensive than being uninsured and having to pay out-of-pocket for all of your care.
Option to pre-purchase multiple plans provides extra protection
If you manually purchase a series of short-term plans (i.e., without using a company that allows you to purchase multiple plans at one time), with each new plan taking effect the day after the previous one ends, there would be no continuity between the plans.
Not only would your deductible and other out-of-pocket costs reset to zero at the end of each plan, but you’d also have to qualify for each subsequent plan based on your current medical status – and medical conditions that crop up during one plan would be considered a pre-existing condition (and thus not covered) by subsequent short-term plans.
Will you be penalized?
People who buy short-term plans could still be assessed ACA’s penalty for being uninsured, because the plans are not considered minimum essential coverage. That said, a short-term plan is really only an appropriate solution if you’re already exempt from the ACA’s penalty.
The IRS considers coverage officially unaffordable if the lowest-cost Bronze plan is more than 8.05 percent of your 2018 income. There’s also an automatic exemption for people who are in the Medicaid coverage gap, along with a variety of other exemptions that might apply depending on the situation).
If you qualify for an exemption, you don’t need to worry about the penalty, and having coverage under a short-term plan is absolutely a better option than being uninsured.
Longer coverage? It’s still short-term.
It should go without saying that short-term plans with longer duration are still short-term health plans. If you buy them as an Obamacare “replacement,” you’re fooling yourself – because they don’t closely resemble ACA-compliant coverage:
They don’t cover pre-existing conditions, aren’t available at all to people with serious pre-existing conditions, impose maximum benefit limits, and don’t cover all of the essential health benefits. (Maternity care, prescription drugs, preventive services, and mental health/substance abuse care are often not covered by short-term plans).
Some coverage beats no coverage.
But it’s also worth noting that short-term plans resemble in many ways the regular individual market plans that were available in many states before the ACA reformed the individual market. Those plans weren’t ideal, which is why the ACA was needed in the first place. But they did provide fairly solid coverage to people who were healthy when they enrolled and then found themselves with unexpected medical costs.
If you’re uninsured (or planning to drop your coverage because you can’t afford the upcoming rate increase) and you know that you’re not eligible for a premium subsidy, check to see what short-term plans are available in your area. Know that despite their drawbacks, coverage under a short-term plan is absolutely preferable to being uninsured.
And if you have an option to purchase up to four short-term plans that will run back-to-back, you’ll be able to set yourself up for nearly all of 2018 with one application, even before the expected rule change on short-term plan durations is implemented.
* EDITOR’S NOTE: Pivot Health is a one of a handful of trusted healthinsurance.org partners that offer plans in the individual health insurance market. As with all health insurance purchases, healthinsurance.org encourages consumers to carefully consider the pros and cons of buying short-term health plans.