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October 30, 2018

Short-Term Health Plan Gaps and Limits Leave People at Risk

Assistant Research Professor, Center on Health Insurance Reforms, Health Policy Institute, McCourt School of Public Policy, Georgetown University

Research Professor, Center on Health Insurance Reforms, Georgetown University

Research Professor, Center on Health Insurance Reforms, Health Policy Institute, McCourt School of Public Policy, Georgetown University

Assistant Research Professor, Center on Health Insurance Reforms, Health Policy Institute, McCourt School of Public Policy, Georgetown University

Research Professor, Center on Health Insurance Reforms, Georgetown University

Research Professor, Center on Health Insurance Reforms, Health Policy Institute, McCourt School of Public Policy, Georgetown University

Lower-cost health plan alternatives like short-term plans come with a catch – many cover far less

The lack of critical plan information people have when they enroll in a short-term health plan marks a return to the way people bought coverage prior to the ACA

Consumers buying coverage during this Affordable Care Act (ACA) open enrollment season will face a more complicated shopping experience, with products marketed as lower-cost alternatives that come with a catch — many cover far less. Because of recent moves by the Trump administration, insurers in most states can now sell short-term plans that provide coverage for just under 12 months, with the option in many states to renew the plan twice, for a total of almost three years of coverage under a “short-term” plan. These plans usually lack consumer protections people have come to expect under the ACA and have gaps in coverage that may not be readily apparent in marketing materials or easily understood by consumers. The lack of critical plan information when enrolling marks a return to the way people bought coverage prior to the ACA, when there was no way to easily compare plans or understand the full scope of coverage. As a result, consumers may enroll in short-term plans believing they are purchasing a plan that will cover unexpected health conditions only to be reimbursed pennies on the dollar for medical services or have their claim denied outright.

To understand the limitations and gaps in short-term plans, we looked at brochures available online from five insurers for short-term plans with durations just under 12 months.1 For the plans we reviewed, only the plan brochures are available to shoppers; people generally need to enroll in coverage before seeing details that would provide more complete information about plan benefits, costs, and limits. Still, the brochures reveal plan features that put people at risk of unexpected costs and coverage gaps.

Short-Term Plans May Be Cheaper, But They Expose Consumers to Medical Underwriting, Skimpy Coverage, Dollar Limits, Preexisting Exclusion Periods and Rescission

Plans that meet ACA standards, including marketplace plans, can’t discriminate against consumers with preexisting conditions. They must offer coverage to all applicants and cover a comprehensive set of benefits without dollar limits or waiting periods, and they can’t cancel coverage when a consumer gets sick. Short-term plans are not subject to these same standards. As a result, short-term plans we reviewed:

Is the plan required to:

Marketplace plan

Short-term plan*

Guarantee coverage to all applicants?

Yes 

No 

Cover preexisting health conditions?

Yes

No

Cover a comprehensive set of benefits, including pharmacy and mental health services?

Yes

No

Let you keep your plan even if you get sick?

Yes

No

* Some states may apply selected consumer protections to short-term plans. Learn more about a specific state's actions at the Commonwealth Fund.

Proponents of short-term plans say they are a necessary coverage option for people who need to fill a gap in coverage and have some protection against catastrophic costs until they can get more comprehensive coverage during open enrollment or at work. But our review of short-term plans available as enrollment season approaches suggests they are neither sufficient to fill a gap between comprehensive plans nor adequate to protect against catastrophic costs. Moreover, critical details on the plans are unavailable to consumers when they are buying coverage. People need more information to understand whether the plan will provide adequate protection for preexisting conditions and those not yet diagnosed.

Looking Forward

The Trump administration has opened the door to lower-cost alternatives to comprehensive coverage, including short-term plans that may be promoted as a longer-term coverage option. But these plans present risks for consumers and state insurance markets. States remain the primary regulators of health insurance and are in a critical position of determining the role of these coverage options in their state markets. States can be more protective than the federal rule, by banning short-term plans, limiting the duration of coverage, or applying consumer protections. At the very least, states should ensure consumers have full information to make an informed decision and buy fully aware of the risks.

Buying Tips

1. Plan brochures are available from the authors.

Publication Details

Date

October 30, 2018

Citation

Dania Palanker, JoAnn Volk, and Kevin Lucia, “Short-Term Health Plan Gaps and Limits Leave People at Risk,” To the Point (blog), Commonwealth Fund, Oct. 30, 2018. https://doi.org/10.26099/kya6-2309

Area of Focus

Topics

Health Reform, Affordable Care Act, ACA Marketplace Stability, ACA Open Enrollment, Non-ACA-Compliant Health Plans, Coverage and Access, Government Programs & Policies, Preexisting Conditions, State Health Policy and Medicaid, Private Insurance, Health Insurance Marketplace, Marketplace Enrollment

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