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Short Term Health Insurance Final Rule 36 months of coverage

The Trump administration released its final rule on short-term health insurance.
Short-term health insurance is a policy that is very similar to pre-affordable care act coverage. The plan does not cover preexisting conditions and requires underwriting. If your accepted, the cost is 50%-60% less than an ACA product. These plans are also using traditional PPO networks, which gives greater access to medical providers.

The final rule allows for short-term coverage to be extended up to 36 months. Currently, coverage can be offered up to 90 days. This could be a game changer in the current individual health insurance markets. Even though the final rule states a plan can be offered for 36 months, does not mean that all insurance companies will embrace this. We could see contracts that are guaranteed renewable for 36 months.

There is much criticism that these short-term plans will negatively impact the ACA marketplace. That criticism is valid because if someone is healthy and can obtain a 36-month policy for 50% less, that will be very attractive. Then the ACA pools will lose a portion of the healthy members that help to offset higher utilizers. Thus ACA rates will increase.

Why did the Administration Extend Short Term Plans?

Currently in Indiana and the rest of the country, if you are not eligible for tax credits/subsidies on the marketplace, the premiums are astronomically for most middle-class families. Then add in the limited network access with huge out of pocket maxes, it’s not uncommon for a family to have $17,000 in premium with potentially another $14,000 in out of pocket, that could cost a family $30K a year.

That same family looks at the short term for $7,000 a year with the same out of pocket, given the short term does not provide the same level of coverage or covers pre-existing conditions. If a family is healthy, it’s hard not to entertain the short-term option. That is why the administration extended short-term plans.

Short-term plans are underwritten which is where you have to answer medical questions and can be denied the plan. Most of these policies are now enrolled through web-based applications, which makes for easy enrollment. The insurance companies use a technique called Post Claim Underwriting when you have a claim. This where the insurance reviews your past medical history to determine if the claim was preexisting. If it is a prior condition, the insurance company can and will deny the claim. One of the real problems with Post-claim underwriting is the delay of payment to the medical provider. The insurance company may request all your medical records for the past five years. Even if you are persistent most medical provider will take at least a month to release records. If you get diagnosed with the condition that needs immediate treatment, the delay in payment could prevent an obstacle to continuing treatment.

In 2018, short-term insurance sales exploded in Indiana and the rest of the country. Smaller insurance companies got creative with their product offering. To be compliant with the rules set by the Obama administration, short-term was only good for 90 days, and companies created 3×4 policies that included 4 short-term policies with one application. These created a huge saving for health Indiana families. Now with the new ruling, I would predict that UnitedHealthcare & Humana launch new short policies.

When you start looking to purchase a short-term policy, buyer beware. You need to make sure you know what you are buying. Always look at the last page of the brochure that lists exclusions. With these plans, you may want to consider buying them from a name brand carrier.