Dangers of Short-Term Health Insurance Plans

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Flu season is here again in Texas. If you or a loved one gets sick, you would expect your health insurance plan to cover your prescriptions. Maybe you are trying to stay in shape during the holiday season, but what if you are injured while exercising and require a hernia surgery? Again, you’d expect the surgery to be a covered benefit. However, basic health care needs like these may not be included if you are on a short-term health insurance plan.

Unfortunately, recently adopted federal rules promote access to skimpy “short-term” health insurance plans, with new coverage now for sale. Americans who choose to enroll in these plans may find the care they need will not be paid for by their insurance provider.

Short-term health insurance plans were originally designed as a temporary measure to maintain coverage during a brief transition period. Examples might be a worker who is changing employers or young adults who have become ineligible for coverage under their parents’ plans and are searching for their own insurance.

Until recently, these plans could provide coverage for up to three months. New changes to regulations now allow these plans to last up to one year — with the option to extend coverage for up to three years.

These plans provide consumers with an inexpensive choice, but they are cheap for a reason. Short-term plans do not have to comply with consumer protections in the Affordable Care Act. They can deny coverage to people with pre-existing conditions or charge them higher premiums, impose lifetime coverage limits, and have limited benefits.

Our review of actual short-term plans for sale now in Texas found plans that do not cover:

  • Any health care for pre-existing medical conditions;
  • Prescription drugs;
  • Maternity care;
  • Treatment of mental health and substance use disorders;
  • Preventive care like annual check-ups with your doctor, cancer screening, immunizations, and contraception;
  • Treatment for cancer if your symptoms start in the first month of the policy; and
  • Procedures including hysterectomy, hernia repair, tonsillectomy, ear tubes, sinus surgery, gallbladder surgery in the first six months of the policy.

Short-term plans often place arbitrary limits on the benefits they do cover, like a cap on how much of a hospital stay the plan will pay for or a limit on the number of covered doctor visits. Because short-term plans leave out key benefits and can discriminate based on people’s pre-existing conditions, they offer healthy people low premiums.

Young and healthy people who choose these cheaper and less comprehensive short-term plans are exposed to huge financial risk if they develop health problems and the health care they need is denied by insurance companies.

As some healthy people leave the regular insurance market for short-term plans, the average cost of comprehensive coverage will rise. People such as older Americans and those without perfect health who need more expansive coverage, but don’t qualify for Affordable Care Act (ACA) subsidies, will pay higher premiums over time.

Consumers lured into these cheaper plans who have a serious illness or injury may be stuck with no coverage when they need it. There is no obligation for short-term plans to renew coverage. Consumers who get sick and are unable to renew their short-term plans generally cannot switch to comprehensive Marketplace coverage until the following January, meaning they may have to go several months with no coverage.

Numerous organizations including AARP, Texas Medical Association, Texas Hospital Association, American Academy of Family Physicians, Blue Cross and Blue Shield Association, American Cancer Society-Cancer Action Network, and the National Alliance on Mental Illness have expressed concerns about short-term plans through federal rule comments.

Twenty-two states have placed limits on the sale of short-term plans to better protect consumers. Eighteen of these states have struck a balance, including Oklahoma, Arizona, and Indiana. They allow short-term plans to fill gaps in coverage, but limit the length of short-term plan contracts to less than a year. Four other states have effectively banned short-term health plans.

State departments of insurance can also use their regulatory authority to more closely oversee these plans without state legislation to limit or ban short-term plans. And, state insurance departments can better educate consumers by:

(A). Using their websites and issuing alerts to warn consumers about the limitations and deceptive marketing often associated with short-term plans.

(B). Leading education campaigns during open enrollment periods to ensure that consumers fully understand and can appropriately weigh their coverage options before they buy.

Year-long “short-term” health insurance plans are on sale now in Texas, and are sure to cause lots of confusion for consumers during the current open enrollment for HealthCare.gov that runs until December 15, 2018. To be clear, all plans on HealthCare.gov have comprehensive coverage. You cannot buy short-term plans on HealthCare.gov.

Short-term plans may have value as a bridge for a temporary coverage gap on the cheap, but Texans must be aware of the risk of unmanageable medical bills. It is critical that Texans have access to quality comprehensive health insurance coverage that is affordable, not just cheap “junk” insurance plans that could leave them with crushing medical debt.

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