Short-term health insurance in Virginia

Virginia’s short term health insurance regulations

Long-standing regulations in Virginia clarify that various state rules and regulations (including guaranteed renewability and coverage of pre-existing conditions) do not apply to short-term healthcare insurance plans as long as they are nonrenewable and have a duration of not more than six months.

But short-term health insurance in Virginia that is issued via out-of-state associations (which includes all of the currently available short-term plans in the state) do not have to follow the same rules (for comparison, see group association short-term rules, versus individual short-term plan rules; the former does not have rules pertaining to renewability or general pre-existing condition protections, while the latter does).

Short-term plans duration in Virginia

Short-term healthcare insurance in Virginia must comply with regulations that require plans issued by an in-state insurer to be guaranteed renewable up to 36 months if the plan has an initial term of more than six months and/or if the insurer uses medical underwriting (virtually all short-term insurers use medical underwriting). But again, all of the currently available plans are issued by associations based outside of Virginia, so those plans can use medical underwriting even though they have longer short-term plan durations.

These rules will change in mid-2021, however, under the terms of new legislation that Virginia has enacted in 2020.

Much stricter rules for short-term plans will take effect in July 2021

Virginia has a Democratic trifecta as of 2020, with a Democratic governor as well as a Democratic majority in the Senate and House of Delegates following the 2019 election. So although the legislature passed bills in prior sessions that would have further relaxed the state’s rules for short-term plans (they were vetoed by the Democratic governor), the legislature has taken a different approach in 2020.

Under the terms of legislation that was signed into law in April 2020, the state’s rules for short-term plans will become much stricter as of mid-2021. And the legislation applies to “any entity that is authorized to sell, offer, or provide a short-term limited-duration medical plan,” which would presumably mean in-state insurers as well as out-of-state associations.

Limiting short-term health plans tends to be a goal among progressive lawmakers, as the plans are not subject to the ACA’s regulations and are thus lower quality than ACA-compliant coverage. To that end, SB404 and HB1037 were passed by Virginia lawmakers in 2020, and signed into law by Gov. Northam. Both bills call for the following changes, effective as of July 2021:

• Limit short-term plans to three-month terms. Renewals will be permitted, but the total duration of the plan cannot exceed six months.
• Prohibit the sale of a short-term plan if it would result in a person having short-term coverage for more than six months in any 12-month period.
• Prohibit the sale of short-term plans during the ACA’s annual open enrollment period (November 1 to December 15; Washington and Maine have enacted similar rules).

The requirements in these bills were relaxed during the course of the legislative session. Initially, the bills called for maximum terms of three months, with no renewals, and also included a requirement that short-term plans have medical loss ratios of at least 85 percent, with rebates for consumers if medical loss ratios fall below that level. But that last provision was later eliminated, and the total duration rule was changed to six months instead of three.

The bills also initially called for an effective date of July 2020, but that was changed to July 2021. So although Virginia has enacted fairly strong limits on short-term plans, it will be more than a year before they take effect.

Another bill enacted in 2020 in Virginia, SB95, requires all state-regulated plans, including short-term health insurance plans, to cover preventive care (as defined under the ACA and implementation regulations in effect as of 2019) with no cost-sharing.

Lawmakers approved more lenient rules for short-term plans in 2018 and 2019, but Governor Northam vetoed the bills

Throughout most of 2017 and 2018, federal regulations limited short-term health insurance plans to no more than three months in duration, and prohibited renewals. New federal regulations for short-term plans took effect in late 2018 (allowing initial terms of up to 364 days and total duration, including renewal, of up to 36 months), but they are clear in noting that states may impose tighter regulations.

Lawmakers in Virginia passed legislation in 2018 that would have allowed short-term plans to have terms of up to 364 days (without the state’s current caveats for plans issued by in-state insurers) but Governor Ralph Northam vetoed it in an effort to protect consumers and the ACA-compliant risk pool.

Similar legislation (SB1240) passed in Virginia in 2019, but Northam vetoed it as well and lawmakers didn’t have enough votes to override the veto.

Which insurers offer short-term plans in Virginia?

There is widespread availability of short-term health insurance policies in Virginia: According to the Virginia State Corporation Commission, nine entities offer short-term health insurance in Virginia. All of these entities are out-of-state group association policies (which means the association can charge additional monthly fees — which are typically nominal — and the state’s rules regarding medical underwriting and renewability don’t apply):

• Aspen American Insurance Company
• Companion Life Insurance Company
• Everest Reinsurance Company
• Freedom Life Insurance
• Golden Rule (UnitedHealthcare)
• LifeShield National Insurance Company
• National General (National Health Insurance Company)
• Standard Security Life Insurance Company of NY
• Standard Life and Accident Insurance Company

Who can get short-term health insurance in Virginia?

Short-term health insurance in Virginia can be purchased by qualified applicants who meet insurer generated underwriting guidelines.  These underwriting provisions generally require an applicant to be under 65 years old (some insurers put the age limit at 64 years) and in fairly good health.

Although short-term medical insurance companies will typically issue a plan to a person who has pre-existing conditions that aren’t severe enough to be listed as yes/no questions on the application, the plans usually have blanket exclusions for pre-existing conditions, so they are not adequate for someone who is in need of ongoing comprehensive medical care. As a general rule, short-term medical plan benefits are limited to unexpected health conditions that are unrelated to any condition a person had prior to enrolling in the plan.

If you’re in need of health insurance coverage in Virginia, you’ll want to first check to see if you might be eligible for a special enrollment period that would allow you to enroll in an ACA-compliant major medical plan. There several qualifying life events that will trigger a special enrollment period and allow you to buy a plan through the health insurance exchange in Virginia. These plans are purchased on a month-to-month basis, so you can enroll in one (with a premium subsidy if you’re eligible) even if you’re only going to need it for a few months before another policy takes effect.

When should I consider short-term health insurance in Virginia?

Excluding coverage for pre-existing conditions can make short-term policies appear more affordable than ACA-compliant policies. However, that upfront affordability can quickly be wiped out by out-of-pocket expenses (like monthly premiums and deductibles) or any costs for a healthcare service for an uncovered condition. Whether on the shores of Virginia Beach or riding high in the Shenandoah, you might find a situation where a short-term health plan might be a viable option, such as:

• If you missed open enrollment for ACA-compliant coverage and do not have a qualifying event that would trigger a special enrollment period.
• If you are newly employed and have a waiting period until you can be covered by your new employer’s health insurance plan; short-term insurance may provide a much more affordable (but less comprehensive) stopgap than COBRA or an ACA-compliant plan.
• If you will soon be eligible for Medicare.
• If you’re not eligible for Medicaid or a premium subsidy in the exchange, an ACA-compliant plan might be unaffordable. Some examples of who are ineligible for premium subsidies:
  • Folks who earn more than 400% of the poverty level (for 2021 coverage, that amounts to $51,040 for a single person; if your ACA-specific modified adjusted gross income is slightly above the subsidy-eligible threshold, there are steps you can take to reduce it).
  • People caught in the ACA’s family glitch.

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.