- Executive order breathes life into short-term coverage
- Preexisting conditions limitations return with short-term coverage
- Benefits can be limited under short-term coverage
- Loss of short-term coverage does not qualify for a Special Enrollment Period (SEP)
- Underwriting review means applications can be declined
- Short-term provides broader networks
- Insureds get a premium break on short-term coverage
Since 2018, administrative changes that have resulted in increased health insurance options for Texas consumers. The administration has loosened rules that apply to short-term coverage, which now make this insurance product a viable option in addition to Affordable Care Act (ACA) plans.
The Trump administration changes made on August 1, 2018 altered Obama administration rules established in 2016, which limited short-term enrollment. The move by the Obama administration was made to shore-up enrollment in the ACA by restricting short-term coverage to a single 90-day policy.
Prior to the changes made by the Obama administration a Texas consumer could purchase multiple policies; each policy offering up to 360 days of coverage. These extended short-term policies became an attractive alternative to ACA plans, even with the personal responsibility fine, because the premiums were up to 40% less than ACA coverage with similar deductible and maximum out-of-pockets limits.
Even though the order was issued by the federal government, many states including Texas did not fully comply with the order because short-term plans had already been filed and approved. Texas Department of Insurance (TDI) did comply with the order to limit duration to 90 days but did not restrict the number of policies the consumer purchased in order to meet the desired coverage time period.
If a consumer wanted 12 months of short-term coverage, TDI allowed four 90-day policies to meet the needed coverage period. Even with the easing of rules, multiple 90-days policies posed problems for Texas consumers because the coverage deductible would reset to zero with each new 90-day policy.
One of the first orders of business for the Trump administration was to expand health insurance options and reduce cost for consumers who had experienced significant increases in insurance premium expense under the ACA. An area of coverage that could be easily modified to address the expansion need was the length of short-term coverage. The administration lifted the 90-day limit and carriers such as UnitedHealthcare and National General responded by offering multiple terms with up to 360 days of coverage. The increased duration in addition to elimination of the personal responsibility fine overnight made short-term coverage attractive both from a coverage and cost standpoint.
Even though short-term insurance provides an attractive alternative to ACA compliant coverage, it is important to understand the significant differences between the two. It is important to understand that short-term coverage is a cost-effective alternative to ACA coverage but does not offer the comprehensive benefits of ACA plans.
The following are coverage differences that should be understood before pursuing short-term coverage instead of ACA coverage.
Return of Preexisting Condition Exclusions – The ACA eliminated the practice of restricting benefits related to preexisting conditions. The practice was commonplace with coverage in the individual market until the beginning of the ACA on October 1, 2013.
Since short-term coverage does not comply with rules established by the ACA, restriction to benefits related to preexisting conditions can be applied. Texas insurance rules apply a 12-month look back period for non-invasive conditions and a 5-year look back period for more serious conditions such as cancer, heart attack, blood disorder, emphysema, diabetes, COPD, or ulcerative colitis.
The preexisting exclusion clause means that benefits are not available for those conditions that have been diagnosed or treated within either the 12-month or 5-year look back period. The preexisting condition exclusion is the reason that Stateside always identifies if there is a medical condition or medical history to be aware of before discussing short-term coverage as an option to ACA coverage. The preexisting condition exclusion will also apply to prescriptions.
Short-Term Coverage Limits Benefits – The ACA lifted annual and lifetime benefit limitations that were applied to coverage prior to passage of the landmark legislation. Coverage prior to the ACA could apply dollar limits to benefits such a $1,500 annual maximum ambulance benefits, $3,000 annual maximum prescription benefits or $500 annual maximum x-ray benefits. In addition to annual maximum benefits, coverage also imposed lifetime maximum benefits of either $2 million, $3 million or $5 million.
Passage of the ACA removed all annual or lifetime benefit limits. Short-term coverage, because policies are not compliant with the ACA, continue to limit certain benefits. For example, prescriptions benefits can be limited to $3,000 per term and depending on the policy total benefits can be limited to either $600,000 or $2 million.
Termination of Short-Term Does Not Qualify You for ACA Coverage – The ACA established an Open Enrollment period each year to make changes in coverage. Outside of Open Enrollment, which is November 1 until December 15, for a January 1 effective date, you would need to experience a qualifying event to be eligible for a Special Enrollment Period (SEP).
Examples of qualifying events include loss of group coverage, loss of coverage due to relocation or divorce, birth, or death or loss of coverage due to turning 26. All short-term coverage has a known, predetermined date in which coverage will end. The termination of coverage is what defines the coverage as short-term. Loss of short-term coverage does not qualify the policyholder for a SEP.
This aspect of short-term coverage means that timing the termination of coverage is critical. Stateside always ensures that the policyholder will have the Open Enrollment period to evaluate ACA options as well as short-term coverage to decide which coverage solutions provides the best options for benefits and budget.
Underwriting Still A Factor In Application Approval – The most significant change with the advent of the ACA was guaranteed issue, which eliminated the underwriting review of health insurance application. The ACA put an end to asking health questions and providing your health history or current medical condition.
Short-term coverage is still underwritten and health questions, although limited in number, still must be answered and can be used to deny coverage.
In reality, if an applicant’s medical history or condition include one of the conditions in the health questions, short-term coverage would not be appropriate because even if the application was approved, there would no coverage for the condition.
Broader Network Available from Short-Term Coverage – As the ACA was being implemented, a major change took place with carrier networks. Carriers shifted from Preferred Provider Organizations (PPO) to Health Maintenance Organizations (HMO) or Exclusive Provider Organizations (EPO).
The result in the network changes was smaller, more restrictive networks which created fewer hospital, doctor, and laboratory options.
Short-term coverage is typically organized as an EPO. Short-term plans did not suffer the retrenchment in network size. Although both EPO plans and HMO plans do not offer out-of-network benefits (with exception of an emergency), EPO networks offer much larger networks and even coverage outside the state of Texas.
Short-term coverage as long as preexisting conditions and coverage limitations are not a factor have become in demand for those who travel frequently outside the state or have dependents attending college out-of-state.
Premium Cost Makes Short-Term Affordable – The universal complaint about the ACA has been premium cost. Since completion of the initial enrollment period, premium costs have been increasing at a rate between 20% and 25% per year.
The dramatic rise in premium cost has priced may Texans out of the health insurance market, with premium payments sometimes higher than a family’s home mortgage. In addition to the premium cost advantage, short-term coverage provides consumers with more options regarding deductible, coinsurance and maximum out-of-pocket amounts which allows coverage to be tailored closer to the available budget. To make short-term coverage even more premium competitive with ACA plans, carriers are now offering discounts up to 20% if the premium payment is made as a single credit card payment.
Short-term coverage is an excellent option if the coverage matches your current health insurance needs. If you have not experienced a significant health issue or have any ongoing treatments including prescriptions, short-term will be provide broad coverage and the ACA is always available during each year’s Open Enrollment. It is important to weigh the premium savings with your historical healthcare needs to determine if the financial rewards justify the risk in not having coverage that is compliant with the ACA.
STATESIDE CAN HELP!
Stateside Insurance Services, since 2003, has focused on providing comprehensive health insurance information, responsive customer service and expert industry knowledge for Texas consumers. Stateside has annually been recognized by health insurance carriers and the Health Insurance Marketplace as a Top Producer in Texas.
Whether the health insurance policy is for an individual, family, small business or supplemental Medicare coverage, Stateside dedicates the time, and our deep industry expertise, to ensure our clients have identified the best health insurance plan for their specific needs.
Stateside is available to answer any general questions regarding your coverage options, can provide a subsidy determination, and even assist in creating and submitting online applications for ACA compliant plans during an Open Enrollment or throughout Special Enrollment periods.
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