How to find the best short-term plan (and cut through the junk)

The Department of Health and Human Services released a proposed rule based on President Trump’s Executive Order from last October, allowing short-term plans to be sold for longer periods and to be renewed by consumers. Rather than only being covered by a short-term plan for three months, allowable coverage would be extended to 364 days. They can then reapply for short-term health coverage at the end of their 364 days.

In essence, people could start to use these temporary plans as their actual health insurance—a situation that the Obama administration had really tried to avoid.

If you are considering using short-term plans for a prolonged period of time, it's probably a good idea to keep reading. If your circumstances necessitate this type of temporary coverage, keep reading as well! 

A supplement not a substitute 

Short-term plans were built for relatively healthy and young individuals to provide them limited healthcare coverage while they were in between major life events, such as switching jobs, marital changes, or other qualifying events.

Why are these so appealing? These are typically much cheaper than major medical plans which makes them attractive, particularly to young and healthy people who don't expect any health issues. Because these plans are not controlled by the ACA, they are available to purchase year-round. 

Short term plans aren’t for everyone but they can be a good option for the following:

• Individuals and families who missed open enrollment period
• Adult children losing coverage from parent’s plan
• Waiting for employer benefits to start
• Unemployed temporarily
• Recent graduates who do not have coverage under parent’s plan
• Uninsured due to life circumstances
• Not eligible to apply for coverage on the marketplace during Special Enrollment
• Employees without group insurance coverage

It’s also important to note that these plans are not considered as minimum essential coverage, so you could still be subject to the ACA’s individual mandate penalty unless otherwise exempt from it. The mandate allows a gap in coverage of less than three months. Although the penalty was repealed in 2017, the repeal won’t take effect until 2019 so you are still on the hook for minimum essential coverage in 2018.

What to watch out for

Sometimes when something seems too good to be true, it's too good to be true. That's why reading the fine print is really, really important. Remember that short-term plans don't adhere to the ACA's consumers protections, which means they come with some serious downsides.

The biggest ones? Using temporary plans can lead to major financial burden and unpredictable risk.  

This type of plan, in contrast to ACA-compliant plans are not required to:

• Cover minimal essential coverage: While they typically cover trips to the ER and hospital care, many of the most popular short-term plans exclude four categories of essential health benefits: preventive services, maternity care, mental health and substance use services, and prescription drugs.
• Set maximum out of pocket limits. Some of the most popular plans have out-of-pocket maximums ranging from $7k - $20k for just three months of coverage. Yikes!
• Insure individuals with pre-existing conditions. They can decide not to cover you for any symptoms from the past five years that any reasonable person would have sought medical advice for. 
• Cover sick people: They can legally turn down an individual with a history of illness or even opt to charge them more for premiums. Key things like cancer, for example, can be excluded from coverage or the payment rates can be capped super low. 

What's more, short-term plans set limits on how much they will pay for various procedures, and the limits are often lower than the actual cost. 

What to avoid no matter what

There's a couple of products out there that we tell our customers to avoid at all costs. They offer a false sense of secutrity and can quickly land you in hot water.  

Fixed indemnity plan: Pays a fixed amount for each covered service directly to you with no deductible. The major downsides here is that there is not a catastrophic cap, and it only covers specifically listed services, like a hospital stay. That fixed amount it pays won't even come close to covering the cost of something serious. 

Mini-Med Plan: Offer limited protection, usually at lower cost, but with sky-high deductibles that can leave you thousands of dollars out of pocket. For industries like retail or hospitality, many companies think offering Mini-Med Plans is a good gesture, but really the plan offers barely any coverage.  

How to choose a quality short-term plan

The long story short? Don't bank on using short-term plans consecutively as a substitution to traditional insurance. And if you anticipate needing insurance to treat an ongoing illness or extensive healthcare costs, it's a really bad idea. But if you need it temporarily and are young and healthy, some are certainly better options than others. 

One short-term provider we recommend and partner with is a company called Pivot. Pivot provides short term medical insurance solutions until a qualified major medical health plan is chosen, helping reduce your financial risk. Pivot plans are renewable 90 day plans which in most states can be automatically renewed 4 times without additional medical screening to provide up to 12 months of continuous coverage. It has certain restrictions and exclusions that we recommend knowing about ahead of time. 

Here are a few tips from the pros on how to find the best short-term plan:

1. Reputable Provider: We recommend working with a reputable provider with a strong network of doctors and hospitals. Network discounts can make health care more affordable even before you meet your deductible. Working with a more-established insurer with a large network of doctors tends to bring better and more negotiable rates than choosing an insurer with a small network of providers.
2. Flexibility: You should also look at plans that offer a choice of deductibles and coverage length. Ordinarily, a higher deductible means a lower premium. It’s also a good idea to go with a plan that can be dropped at any time without any penalties.
3. Customize It: Look for a plan that offers a range of deductibles and coverage length. A good short-term plan will let you to opt for the deductible, coinsurance, and length to best suit your needs on your budget. Remember, the higher deductible means a lower premium. 
4. Watch for penalties for cancellation. Make sure you choose a plan that can be dropped at any time without any penalties. 
5. Look for coverage with your preferred doctors. If you are tied to your doctor, make sure they accept the short-term plan you choose.  

Other options to consider

Whatever your reasons for choosing a short-term plan, whether you're in between jobs, struggling to afford any at all, or just have a better-than-nothing mentality, we want what's best for you. Here are some other options to consider that might be a better fit (with less risk).

Health Values: Today, you need “insurance for your insurance.” Since only 51% of Americans have enough savings to pay a $5,000 medical bill, it's important to be financially prepared should an injury or accident happen. A HealthValues membership, essentially a health gap insurance plan, helps with cash for accidents, helps you pay bills for things that health insurance doesn't cover, and offers discounts on imaging and prescriptions. 

Medi-Share: Medi-Share is an affordable alternative to traditional health insurance that allows Christians to pool their resources and share the cost of each other's healthcare bills. They have a legit PPO network and considerably lower premiums than traditional insurance. You can also sign up any time, instead of waiting around for open enrollment. 

Market implications 

Now that short-term plans can be renewed for almost a year, what does this policy change mean for the market? 

Many are predicting that many will opt to use short-term plans as a substitute for traditional insurance. If that's the case, many young, healthy people will be leaving the market, especially those individuals who aren't getting a good deal on the exchanges. And what happens with health customers jump ship, the older and sicker customers with higher health costs will be left, possibly driving up the price of premiums for anyone left. 

With the individual mandate on its way out (effective 2019), the young and healthy population will have even less of a reason to seem coverage through the exchanges, since the individual mandate fee did deter some from opting out of coverage. If the number of people buying traditional insurance goes down, prices will go up. It's simple supply and demand. 

We also will be keeping an eye on the insurers. When the dusts settles, prices rise and enrollments decrease, we would be wary of insurers leaving the individual market altogether, a growing trend we have seen in the past couple of years. 

About Take Command Health

Take Command Health launched three years ago with the goal of bringing awareness, advocacy, and transparency to the confusing world of health insurance for small businesses and individuals. Take Command Health is at the forefront of this issue, a recognized leader in QSEHRA administration and small business tax strategy, with customers in every state.