Individual and Family
Good news for families and individuals wrestling with soaring health insurance premiums: The federal government just made it easier to buy and maintain lower-priced, short-term health insurance.
The Centers for Medicare and Medicaid Services (CMS) on Aug. 1 extended the length of time you can keep a short-term policy from just 90 days to one year. In addition, you’ll be able to renew the same short-term policy annually for up to three years.
The changes are the latest tweaks to the Affordable Care Act (ACA or Obamacare) made by the Trump administration aimed at giving middle-class consumers access to more affordable health insurance. The announcement reversed a 2017 Obama-era rule that had reduced the coverage window of short-term insurance from one year to 90 days.
Before you get too excited, know that these changes and rules could vary greatly from state to state. As the map above shows, the Federal rules are being implemented differently at the state level.
Short-term health insurance is 80 percent cheaper than non-subsidized, Obamacare coverage, according to a study eHealth published in August. The same study found that the average monthly cost of ACA insurance for a family of four that didn’t qualify for an Obamacare subsidy was $1,376 — up 15 percent from 2017 and more than 60 percent higher than the same policy in 2014, when Obamacare was launched.
“We continue to see a crisis of affordability in the individual insurance market, especially for those who don’t qualify for large subsidies,” said CMS Administrator Seema Verma in a statement announcing the rule change. “The final rule opens the door to new, more affordable coverage options for millions of middle-class Americans who have been priced out of ACA plans.”
Short-term health plans are cheaper, in part, because they aren’t required to include all of the benefits mandated by the ACA and, as the name implies, they’re only guaranteed for a limited amount of time. The plans originally were designed for people facing temporary gaps in medical coverage, and this remains the primary reason people buy short-term policies.
But a growing number of consumers are turning to the policies as a longer-term solution as premiums for non-subsidized ACA plans continue to rise.
In February, only 42 percent of insurers said they intended to offer short-term plans in 2019. By July, that number had increased to 73 percent. The change of sentiment reflects the government’s widely anticipated extension of short-term coverage, as well as an increased awareness that consumers who can’t afford ACA coverage must have access to viable alternatives.
In an eHealth survey of insurers conducted last February, just 33 percent viewed short-term plans as a “necessary option for those who can’t afford ACA coverage.” By July, that percentage had increased to 80 percent.
Most consumers remain largely in the dark about the modifications to the ACA currently underway. In an eHealth survey conducted in March, only 13 percent of customers were aware that short-term health coverage was likely to be extended.
Short-term health insurance may be a financially attractive alternative to ACA plans. But it is critical consumers clearly understand what the policies can and cannot do.
Even with these limitations, short-term insurance can make sense for some consumers, particularly if the alternative is no insurance at all. To learn more about the full range of coverage options available in the individual, non-employer-based market, check out our new eBook, the 2019 eHealth Insurance Guide.