How Long Does Short Term Health Insurance Last?
Short term health insurance provides a lower-cost alternative to plans that meet the standards for minimum essential coverage (i.e., major medical policies) under the Affordable Care Act. These plans make sense when you’re in transition, but they do come with limits on how long you can have a policy in effect and how many times that policy can be renewed. For a brief period, short term policies were capped at three months without the option to renew. A new federal rule changes these limits.
Duration of a Short Term Health Plan
For about three decades, short term health plans followed state law regarding limits on duration and renewability, with some states allowing policies to last up to 364 days and others limiting the duration to just six months. That changed in 2016, when the Obama administration imposed a federal cap of three months on short term, limited duration plans. States are free to regulate short term health plans up to the limits of the federal government. Some states outright prohibit these kinds of policies from being sold, and others impose such strict regulations on health plans in general that insurers won’t sell temporary policies there.
The Obama administration changed the rule to three months to encourage people to enroll in major medical policies being sold on Affordable Care Act exchanges, arguing that capping the duration on these plans would keep the risk pool stable by keeping healthy people from flocking to less expensive short term plans. In reality, most people use short term health insurance for its intended purpose, to bridge a gap between major medical plans. Capping the limit to three months just made it harder for people without other insurance options to get any kind of coverage at all.
In February, the Centers for Medicare and Medicaid Services (CMS), under the offices of the Department of Health and Human Services, proposed a rule that would restore states’ rights regarding the regulation of short term health insurance. This rule was finalized on August 1, and it’s set to be published in the Federal Register on August 3. The rule takes effect 60 days from publication in the register, meaning an effective date of October 2, 2018.
This final rule defines short term, limited duration health plans at the federal level as policies that last “less than 12 months” in initial contract duration. If you live in a state that follows federal regulations for defining short term policies, then you can buy a short term plan that lasts nearly a year (but not a full year). Some states, as mentioned earlier, regulate temporary health plans differently. These states will still be allowed that flexibility. The new rule does not impose a standard to which all states must adhere; instead, it gives states the choice to allow insurers to sell policies that last nearly a year. To check how your state handles duration limits, see our article on current regulations by state.
You should also know that the federal duration cap doesn’t mean you can only find short term policies that last this long. These plans are designed for interim needs, and many carriers sell policies that last anywhere from one month up to the cap of less than 12 months. One of the biggest selling points for these plans – other than affordability – is that they’re flexible. If you just need to bridge a six-week gap while you wait for a new major medical policy to take effect at work, for example, then a short term health plan can help you out.
Renewing Short Term Health Insurance
The 2016 Obama regulation that capped short term policies to three months also barred people from renewing these plans. You could still buy another, different short term health plan at the end of the contract, but you would have to apply for a new policy all over again, including undergoing a new medical underwriting process that might have prevented you from buying new coverage. Until the new federal rule issued in August, short term plans were not renewable.
Temporary health plans are now renewable for a combined period of up to 36 months. Once your short term health plan ends, you can opt to renew or extend it for up to 36 months. The initial contract duration can’t exceed 12 months. But let’s say you liked your short term plan and wanted to keep it. If the company and your state allow it, you can renew that same policy twice, for a total of 36 months.
This renewal regulation only applies to the same contract. If you still wanted short term health insurance at the end of 36 months, you could apply for a completely different contract – with the same carrier or a different one – and it would act as a new, separate policy (because it would be one). The 36-month renewal cap only means you can’t have the same exact contract in place for longer than 36 months total. And as with the duration limit of 12 months for the initial contract, this 36-month cap on renewals and extensions is also subject to individual state regulations. Some states might take a less generous approach to this policy.
Temporary health insurance provides a safety net for people who want coverage but either can’t afford or are not currently eligible to enroll in a standard major medical plan. The ACA only allows people to buy non-group major medical policies during open enrollment, which runs for about six weeks in the fall, unless you qualify for a special enrollment period based on significant life changes, like marriage or the loss of a job. The open enrollment period does not apply to short term plans, so you can sign up for them at any point during the year. A brief coverage period under a temporary policy may be enough to last you until you can afford or gain access to major medical insurance. And with new regulations in place, these short term policies can give you peace of mind for longer periods of time.