Updated October 5, 2018.
Purchasing individual health insurance comes with many pressures. Those seeking coverage are often strapped with additional stressors such as loss of a job, loss of employer coverage, divorce, or other strains that negatively affect financial well being, leading to increased physical and emotional health risks. Many confusing questions go through a buyer’s mind: “Can I afford it?” “Does it cover my needs?” “I just don’t understand my buying options.”
Consumer studies have indicated that as a population, we are becoming better about making health care decisions. This may be because we have a greater stake in the game, higher premiums, higher deductibles, smaller networks, and fewer options. Though most of us receive health insurance benefits from our employers, there are still many who fall outside that category:
- Individuals who cannot afford COBRA
- Self-employed individuals that do not qualify for subsidies on Affordable Care Act (ACA) plans
- Employees of smaller companies not providing coverage and part-time or seasonal workers
- Students and/or children turning 26 and aging out of parents’ plans
- Those between jobs or in their employer’s waiting period
- Early retirees or spouses
- Moving to a new state
- Those whose providers are not “in-network”
- Those going through a divorce
- Those earning too much for Medicaid or too little/too much for government subsidies
A more affordable option for these circumstances may be short-term health insurance. In 2017, the average short-term premium was just $79 per month for a 30 year old. Also in 2017, individual medical plan rates rose at a national average of 21 percent. Short-term plans may fill a temporary gap in coverage and provide a more cost-effective option for those in these situations.
In October of 2017, President Trump signed an executive order directing federal agencies to draft regulations aimed at rolling back the former short-term medical restrictions. On February 20, 2018, Health and Human Services proposed the new rules and the final rule was issued on August 1, 2018. These new laws take place on October 2, 2018, but may be limited by final State rulings.
New federal regulations now allow up to 364-day short-term health insurance plans with the option to renew for up to 36 months. Many states have proposed their own limits to these federal regulations. Ohio and Kentucky, for example, allow up to 360 days, while Indiana allows up to 184 days and Kansas and Montana only up to 123 days. Each state has adopted varying levels on what they will allow and many states have yet to propose their own limits. This will be a state-by-state approach and it is important to understand the guidance and regulations based upon the state in which you reside. Individual plan buyers who are unable or unwilling to buy ACA compliant plans may soon be able to purchase longer-term plans with greater duration of coverage. Considering tax penalties will no longer be enforced for 2019, short-term plans are a viable option.
Short-term plans also offer financial advantages for brokers. These plans are not just an open enrollment period sale like the distant relatives in ACA. You can sell and receive commissions year round.
Be aware: These plans are not required to comply with the ACA, include the use of underwriting (pre-existing conditions are not covered and applicants may be declined), may not cover certain medical expenses, and may impose annual/lifetime maximums/limits. Additionally, termination of a short-term plan will not trigger a special enrollment period in the individual market and today short-term plans are not considered minimum essential coverage under ACA.
Many short-term plans come with additional perks and benefits such as wellness, telemedicine, etc.
Helping people during difficult times or transitions in their lives is a win-win situation. Providing options for those who formerly have had very limited choices is much appreciated by those in need. If you are looking for solutions and your clients fall into these categories, call Cornerstone today. We have several options to assist you in finding affordable solutions for your clients.