In a consumer-friendly move, the Trump administration, through a proposed rule issued by the Department of Health and Human Services (HHS), U.S. Department of Labor (DOL) and the Internal Revenue Service (IRS) —the agencies — is restoring short-term medical (STM) to its position as an affordable alternative to the spiraling costs of plans that comply fully with Affordable Care Act (ACA) coverage standards.
On Feb. 20, the agencies released a proposed rule that would return short-term medical to its prior duration of up to 12 months. In addition, the agencies have requested comments as to whether short-term medical could be revised to permit optional renewability at the end of the initial period.
On March 8, the Centers for Medicare & Medicaid Services (CMS) sent a letter to the governor of Idaho resoundingly endorsing innovation in the marketplace and using short-term medical as the vehicle to do it.
Since key ACA major medical insurance requirements were implemented in 2014, we have watched premiums rise, networks narrow and insurance companies exit the market. According to the proposed rule, in 2018, 52% of all counties have access to only one carrier on their state exchange and premiums will increase another 10% in 2019. The Congressional Budget Office estimates that 3 million people will drop their individual market coverage in 2019 and only 100,000 to 200,000 of those will purchase short-term medical, leaving many uninsured.
The proposed rule states that those who are likely to buy short-term medical “would benefit from increased insurance options at lower premiums, as the average monthly premium in the fourth quarter of 2016 for a short-term, limited-duration policy was approximately $124 compared to $393 for an unsubsidized ACA-compliant plan.” The proposed rule goes on to comment that a benefit of short-term medical is “increased access to affordable health insurance for consumers unable or unwilling to purchase ACA –compliant plans, potentially resulting in improved health outcomes for them.”
Short-term medical policies have been available for decades to address individuals’ need for temporary health insurance.
Prior to the ACA allowing dependents to be covered under their parents’ group medical plan, one of the most common purchasers of short-term medical plans were recent college graduates who were no longer covered by their parents’ plan, but were not yet covered under another group plan.
This could be because they were not yet employed or because their new employer had a waiting period before coverage would begin. In fact, the desirability of short-term medical was acknowledged by Congress because it specifically exempted STM from the requirements to which all major medical plans had to adhere.
As the proposed rule states, another use of short-term medical is “increased choice at lower cost and increased protection (for consumers who are currently uninsured) from catastrophic health care expenses.”
What should an insured expect to have covered under an STM plan?
Short-term medical provides benefits for physician services, emergency rooms, inpatient and outpatient surgery, hospital room, intensive care, ambulance services, organ transplants, laboratory diagnostics, x-rays, and more.
While STM doesn’t necessarily provide all 10 of the essential health benefits (EHBs) that an ACA-compliant major medical policy must offer, the short-term medical plans sold on my own organization’s site, http://www.healthedeals.com, cover at least part of seven of the ACA EHBs.
In addition, STM policies can provide up to an annual maximum of $2 million in medical services coverage, and typically employ networks that are less restrictive than the networks used in connection with ACA-compliant major medical plans.
Although the currently available short-term medical plans do have pre-existing condition limitations, apply simplified underwriting, and lack coverage for all ACA EHBs, an STM plan can be a very acceptable and affordable alternative to an individual major medical plan for qualified individuals.
Although STM policies do not cover every situation covered by an ACA-compliant plan, they are much more affordable.