Short-term health insurance is sometimes scoffed at as “sham insurance.” But to those who turn to it in need, this kind of insurance offers vital protection from unexpected medical costs. The Trump administration’s plan to extend how long it lasts makes sense.
Related First Opinion: Short-term insurance plans are hard for consumers to understand
Short-term plans offer temporary coverage for many of the same things standard health plans do. They don’t, however, cover things like preventive care, maternity care, or pre-existing medical conditions. Short-term plans do not meet the coverage requirements of the Affordable Care Act (ACA), but they have long offered a meaningful measure of protection to people who need to fill a gap in health insurance coverage.
Short-term health insurance plans were once available for up to 11 months, or 364 days in many states. An Obama-era rule that took effect in 2017 limited short-term coverage to no more than 90 days at a time. The Trump administration has proposed a rule change that would reverse the 90-day limit and again allow short-term plans to be sold for “any period of less than 12 months.”
Health policy academics have gone into hysterics over the reversal of the 90-day rule. They argue that it would contribute to increased costs for ACA-compliant plans and potentially increase the numbers of the uninsured.
These arguments aren’t without merit. But consumers who need coverage today don’t have the privilege of waiting for the arrival of an affordable ACA health insurance market.
In just five years, the average premium for traditional family coverage in the individual insurance market has increased 174 percent, from $426 per month in 2013 to $1,168 per month today — $410 higher than the average mortgage payment. For families that don’t qualify for government subsidies, that puts the outlay for health insurance at more than $14,000 per year.
Good luck paying for that on a typical American family’s budget, even in a two-income household. Is it any wonder that 27 percent of short-term policyholders turn to it because it’s the most affordable option available? The average monthly family premium for short-term health plans in 2017 was $267, about one-quarter the price of an ACA plan.
Let’s agree for a minute that traditional ACA-compliant health insurance is the best choice when you can afford it. Let’s also agree that consumers need to know what they’re buying when it comes to short-term plans.
My company, eHealth, sells both short-term and ACA-compliant health insurance. We make it clear to customers that short-term products do not meet Affordable Care Act requirements and that customers could be declined insurance based on their medical history. But we see that the current 90-day limit for short-term plans hurts many of the people it was intended to help.
Imagine that you missed the ACA’s open enrollment period and, rather than go uninsured, you bought a short-term policy in early January. It will only cover you for 90 days, but you plan to reapply for a new one at the end of every 90-day term until the year is out. Then disaster strikes — a serious medical diagnosis before your first 90 days have elapsed. Under the current rules, your application for a second 90-day plan can be declined because of this new pre-existing condition, leaving you totally unprotected against medical bills for the next nine months.
That wouldn’t happen if you’d been allowed to enroll in a short-term policy that lasted for 364 days. You could potentially have kept your policy through the next open enrollment period. As your medical bills piled up through the year, your short-term plan could have saved you thousands of dollars. With an 11-month or 364-day coverage period, any gap you faced would have been much shorter.
Those who cry foul at the idea of rescinding the 90-day rule are out of touch with the realities of the health insurance market. They argue that the 90-day rule pushes people into more robust ACA-compliant plans. But as premium costs rise, eHealth has seen the number of unsubsidized consumers buying major medical plans decline, and those who simply can’t afford these, or who miss open enrollment, find themselves less protected than before.
Allowing short-term health policies to offer coverage beyond 90 days will not bring down the Affordable Care Act. It’s the outrageous cost of coverage in the ACA market that’s going to do that if serious steps aren’t taken soon. Without loosened restrictions on essential health benefits required by ACA plans, or richer and broader premium subsidies for middle-class families that don’t qualify for help today, it’s difficult to see any relief on the horizon. And without a robust reinsurance program to underwrite the market as a whole, it’s hard to imagine a stable future.
In the meantime, cost-stressed consumers are caught in the middle between unaffordable ACA plans and the prospect of going totally uninsured. Short-term health insurance is far from perfect, but it’s the only possible choice for many people in the market today.
The administration’s proposal to rescind the 90-day limit for short-term health insurance plans will give a meaningful level of protection against unexpected medical costs to those who might otherwise have no protection at all.
Scott Flanders is CEO of eHealth, Inc., a private company that sells short-term health insurance as well as ACA-compliant insurance. Extending the duration of short-term insurance would likely increase sales of these plans.