Short Term Health Insurance and Association Health Plans
Short term health insurance and association health plans have been in the news recently. You may not have heard about these types of coverage before. But with the new changes implemented by the Trump administration, you may be hearing more about these types of coverage. Both types serve different purposes but share the same goal: to help more Americans gain access to affordable health insurance that they actually want.
The Basics
Short term health plans are a temporary form of healthcare coverage that are intended to provide you with some form of protection for emergency care services, hospitalization and other unexpected events. These policies are good for times when you’re in transition, like switching to a new job or waiting for a major medical policy to take effect. The Trump administration recently increased the duration of these plans from 90 days to just under a year. Some states will impose stricter limitations, but at the federal level and in most states, you can buy policies that last just under 12 months starting in October.
Short term medical insurance can also be good for those who missed the open enrollment deadline for comprehensive coverage, those who are in between jobs and are waiting for their new insurance to kick in, or those who recently graduated from college and are no longer covered by a student health plan or family coverage.
Association health plans, by contrast, allow small businesses and self-employed individuals to band together to save costs on purchasing insurance for themselves and their employees. This means that small businesses will have more choice in purchasing healthcare policies with more flexibility in the coverage that’s provided. Previously, small businesses and the self-employed wouldn’t be eligible for the cost savings available to larger companies. Association health plans would be offered by employers, giving their employees a cost-effective option over traditional medical coverage. In short, association health plans are meant for small businesses, including self-employed people, while short term coverage is designed for individuals and families.
Compliance with the Affordable Care Act
Short term policies were never designed to comply with the more comprehensive coverage provided by major medical insurance under the rules of the ACA. These plans don’t have to cover essential health benefits, like maternity care or prescription drugs, they can deny coverage to people with pre-existing conditions, and they can set caps on benefit payouts for the year and for a lifetime. Major medical policies that you buy from an Obamacare marketplace or apart from the exchange must meet certain minimum standards. That’s why these plans cost more.
Job-based coverage under the Affordable Care Act also must meet minimum standards depending on employer size. If your work offers coverage, it must be affordable (less than 9.5 percent of your household’s income for self-only coverage) and adhere to other requirements as outlined by Obamacare. These include minimum value standards and the essential health benefits.
Association health plans could operate differently. Since these plans would not be regulated the same way as employer-provided coverage under the ACA, associations could choose the kind of coverage they want to buy and offer to their workers. These plans might exclude certain essential health benefits to save money, or they might put limitations on coverage that would reduce premiums but increase out-of-pocket costs. Association health plans wouldn’t have to comply with ACA regulations.
Cost of Premiums
Both temporary medical and association health plans typically cost less than traditional policies offered under the Affordable Care Act. This lower cost of premiums goes hand in hand with less coverage offered through these plans. Those who are young and in good overall health might enjoy lower costs. If you have any health problems, you could be denied coverage with a short term policy. You can be charged higher premiums with both types of plans, even if you’re just at a higher risk of developing health problems.
Pre-Existing Conditions
Obamacare policies are guaranteed-issue, which means that anyone can buy these plans regardless of medical history. Insurers aren’t allowed to deny major medical coverage to people with pre-existing conditions, and they can’t charge people with medical problems more for coverage than they would for healthy customers. Those who obtain temporary health plans or association medical policies won’t have these same protections.
Short term insurance is notorious for excluding people with medical problems or those who’ve experienced a recent illness. While association health plans are provided by employers to include all employees, rates may be higher for those with pre-existing conditions.
IHC Group, a short term insurer, developed a product specifically for people with pre-existing conditions this year. It covers up to $25,000 worth of medical care if you’ve got a health problem that would normally prevent you from buying temporary coverage. But IHC is the only company with such a policy, and it’s not meant for people with expensive conditions or chronic problems.
No Maternity Care
Temporary health plans don’t cover maternity care. This means that any costs related to pregnancy and childbirth aren’t covered. If a woman becomes pregnant while under a short term policy, she may be denied a new policy for a pre-existing condition once her policy expires. With association medical insurance, maternity benefits are only required to be provided by employers with more than 15 employees. If you’re working for a company with fewer than 15 employees, your healthcare policy may not include maternity coverage.
Prescription Medications
Short term medical policies don’t have to provide coverage for prescriptions. Some may offer this option either with the plan or as an add-on, and many include a discount card that can mitigate the costs of prescription drugs. Insurance provided by small business associations may or may not include prescription drug coverage, especially for employers with fewer than 50 employees. Covering drugs can get costly, and it’s unlikely that temporary or association health plans would include this coverage because it would raise rates for everyone in the plan.
The Downside
The lack of essential coverage with both temporary and association healthcare insurance can be problematic for those who develop chronic conditions or who require medical care for services that aren’t covered by their plan. While it’s still too early to know for sure, it appears that there’s the possibility of a wide range of plans that employers can purchase. Because employers can choose fewer benefits by joining an association of like-minded enterprises, employees may be stuck with limited coverage that doesn’t meet their needs, resulting in more out-of-pocket costs in the long run.
The Good News
Individuals can shop around for short term policies to find the one that suits their needs when it comes to premium costs and benefits. Small businesses and those who are self-employed will now have the flexibility to choose plans at a greater cost savings than in the past, increasing their options and allowing them the ability to compete with larger companies. Guidelines put into place by the current administration may open new doors for health insurance if you’re a small business owner or entrepreneur looking for affordable peace of mind.
