If you haven’t been living under a rock over the last six months you have probably heard the terms “Trumpcare” or “Junk Insurance.” These soundbites often refer to a type of health insurance known as Short Term Health Insurance and depending on a commentator’s political leanings, you probably have heard strong opinions either positive or negative about this type of health plan. Given the political spotlight that has been shined on Short Term plans, we at HealthPocket wanted to dig in and give you a better understanding of what they are.
Short Term Health Insurance is a type of health plan that has traditionally been characterized as a health plan with a term length anywhere from 30 to 364 days which functions similarly to a traditional health insurance plan with deductibles, co-pays, and out of pocket maximums. Short Term plans have been around for decades and were often used as a gap insurance for those who were in between employer plans so that the subscriber could maintain continuous coverage.
When the ACA’s Qualified Health Plans (QHP) went into effect in 2014, Short Term Health Insurance didn’t change, but the individual health insurance market of which Short Term Health Insurance was one product did. The ACA excluded Short Term Health insurance from what qualified as “individual health insurance,” so it was not required to include all ten of the minimum essential benefits that define a QHP, the plans sold on ACA health exchanges. Since these plans did not meet the requirements of a QHP under the new law, plan members would be subject to the individual mandate tax penalty adding a significant expense to the overall consumer costs.
As the carriers who offered ACA plans realized that the original premium rates of 2014 ACA plans were far too low, and rates increased annually, many consumers found that the premiums were unaffordable. Short Term Health Insurance plans became a logical alternative for those consumers who didn’t qualify for a subsidy and simply could not afford an ACA plan.
In the final months of President Obama’s term, a belief emerged that the movement of those who found ACA plans unaffordable to a Short Term plan caused the risk pool for ACA plans to become riskier. To address this belief, a rule change was introduced that would require Short Term Health Insurance plans to offer plans with terms of less than three-months effective in April of 2017.
When President Trump took office, he vowed to get rid of the ACA once and for all. Although his and the Republican-controlled Congress attempts to “repeal and replace” the law have been less than successful, they have been able to enact some changes that give consumers more choice when it comes to their health insurance. With the passage of the Tax Cuts and Jobs Act of 2017 at the end of December 2017, the Individual Shared Responsibility Payment colloquially known as the “Obamacare Tax Penalty” would no longer be in place for consumers looking for health insurance in 2019. This significantly reduced the incentives for consumers to purchase an ACA QHP. This was a huge concern to those who had championed the ACA as many of those who had purchased their health insurance did so to avoid a hit on their tax bill.
The other big policy change came into effect on October 1st, 2018. HHS enacted new rules that allowed consumers to purchase a Short Term Health Insurance plan with a term of up to 12 months with an option to renew up to a total of 36 months.
Both proponents and opponents of the ACA agree, these two changes together have made Short Term Health Insurance a more viable alternative to an ACA plan. ACA proponents have voiced strong concerns that healhty consumers would forego the robust benefits provided by ACA QHPs to save money with Short Term Health Insurance,leaving only the sickest individuals in the ACA plans. ACA opponents counter that the ACA has failed in its promise to insure all Americans because what consumers need is not a one-size-fits-all solution, but rather choices and options.
As the 2020 presidential campaign starts to ramp up, Short Term Health Insurance will continue to be a hot topic.
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