The U.S. President, Donald Trump, passed a new ruling on Wednesday which will increase the duration of short-term health insurance plans in order to make healthcare more affordable for customers on the individual insurance market.
While many proponents considered the ruling a favorable move for cost-burdened Americans, critics claimed that it could incur more healthcare costs to those who are still on Obamacare plans.
Short-Term Health Plans
According to the new rule, short-term health plans will be extended from their current term of three months to up to an entire year. This affordability factor will give Americans another alternative to Obamacare, which will begin enrollment on November 1. The extension on short-term plans is expected to take effect this September.
Traditionally, these short-term insurance plans are used by people who’re looking for a new job or transitioning from college to a job, in order to bridge the coverage gap until they are eligible for employer-provided insurance. Now the new ruling could turn the short-term plan into a long-term solution for those who are looking for an affordable alternative to other individual policies sold on the market.
With the ability to extend the plan up to 36 months, customers now have another insurance option apart from the policies sold under the Affordable Care Act – popularly known as Obamacare – which have become more expensive over the past year. Monthly premiums rose by an average of 21 per cent in 2017, according to a federal report. The move priced many enrollees out of the market for falling above the premium subsidy threshold.
More Affordable than Obamacare
According to Kaiser Family Foundation’s analysis, short-term plans are much more affordable than traditional Obamacare policies. Even the least-expensive plan under Obamacare cost 20 per cent more than the premium for a short-term plan in the same area.
But just because these plans are cheaper than the traditional alternatives on the federal and state marketplace, doesn’t mean that they’re better.
Experts say that customers should understand the terms of a policy they are buying since not all cheap plans offer the same consumer protections as the comprehensive plans under the Affordable Care Act.
This means that a carrier of short-term plans can create their own policy terms such as rejecting customers with preexisting health conditions, charging them higher premiums or issuing policies that do not include treatment for their pre-existing condition.
Here are a few things you need to know about short-term plans before you decide to invest in one.
The Penalty for Being on a Short-Term Plan
Since a short-term healthcare plan doesn’t qualify as an insurance policy under Obamacare, you will be considered uninsured while you’re on the plan. The penalty for not having an accredited insurance plan in 2018 costs $695 per adult and $347.50 per child.
If your entire family is on a short-term insurance plan, you would have to pay a total fee of $2,085 or 2.5 per cent of your family income (mostly the higher of the two). The penalty fee for being on a short-term plan will be reduced to $0 starting 2019, although you’re still required to have health insurance under the individual mandate law.
Pregnancy and Other Health Benefits Are Not Covered
Most short-term plans don’t cover a host of pre-existing conditions including maternity care and hospitalization after giving birth. On the other hand, Affordable Care Act coves pregnancy under its 10 essential health benefits.
According to Kaiser’s analysis, none of the short-term plans cover pregnancy, and some ever turn away parents who are expecting a baby or charge them higher premiums. Other common conditions that aren’t covered under these plans include mental health, prescription drugs and substance abuse.
Lower Catastrophic Coverage
Short-term plans don’t provide the same coverage for catastrophic accidents as Obamacare plans. This inexpensive policy provides maximum coverage of $250,000 for its cheapest plan and $2 million for its most expensive one. This may seem enough but a catastrophic accident could potentially cost more than these limits.
Furthermore, if you don’t recover fully from a physical accident by the time your policy ends, your carrier may even refuse to renew the contract or charge you higher premium. If you want guaranteed continued coverage without increase in premium, your best bet may be to apply for an Obamacare plan once enrollment begins in October.