You can save a lot of money on health insurance, but should you?
- When scouting health insurance, it’s worth keeping in mind the old adage: You get what you pay for.
- Short-term, limited duration health plans are generally much less expensive – as much as 50 percent to 80 percent cheaper – than health insurance regulated by the Affordable Care Act, but they cover far less.
- “As with all insurance, people should go in with their eyes open and know what they’re buying,” said Alex Azar, Health and Human Services Secretary.
Not everyone is a fan of Obamacare.
Complaints range from expensive premiums and high deductibles to covered services people don't think they need.
But compare the typical health insurance plan regulated by the Affordable Care Act with a cheaper short-term health plan, and you might just change your mind.
Short-term health insurance is a stripped-down health care plan that doesn't fall under ACA regulations. These plans don't have to cover specific services, such as prescription medication or maternity benefits, and they are of limited duration: just three months.
False security
Heather Kofke-Egger knows first-hand the risks of depending on a plan with skimpy benefits.
Just out of college in 2002, she could pay $450 a month for a health plan offered to new graduates, or $85 a month for a short-term plan. "I knew I was taking a risk," she said. "Plans didn't cover pre-existing conditions, but without a job lined up, I had no way to pay the [higher] premiums."
Kofke-Egger, now a health-care data professional in Chicago, bought the cheaper plan, thinking her youth and relatively good health would protect her from unexpected expenses.
Diagnosed with depression in college, Kofke-Egger was doing well upon graduation. She filled a 90-day supply of antidepressants before leaving school and hoped to have a job with health insurance by the time she needed a refill.
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"But I wasn't able to find a job quickly, and the transition from college and stress of being unable to find a job really flared up my depression," she said. She took a low-level temp job, and her situation grew worse. A primary care doctor put her on another medication.
Without a prescription drug benefit, Kofke-Egger was paying more than $600 a month for medication and therapy. "About half my gross pay went to medical care," she said. "I was struggling to get myself to work each day."
Short-duration plans give you a feeling of safety, Kofke-Egger said, but not a full understanding of the lack of protections. "You have to read the fine print really carefully," she said. Young people may be especially vulnerable.
Kofke-Egger credits a program in Maine with allowing her to qualify for Medicaid and get complete treatment for the first time in six months. "It literally changed the trajectory of my life and career," she said, and helped her to gradually get better.
"No one expects to have a major mental health episode," Kofke-Egger said. "The coverage I bought for emergencies was useless when I needed it the most."
Skimpy insurance for longer
In August, the White House announced that short-term health plans would now be available with renewals for up to three years.
The Republican Party wasn't able to get the Affordable Care Act repealed, and "Trump is thinking [it's] another step to undermine Obamacare," said Jason Hargraves, managing editor of InsuranceQuotes, an insurance plan comparison website. "They can do little things to tinker with the mechanics and hope [the ACA] fails."
According to the president, hundreds of thousands more people will be able to afford health care. "It might be true, but it won't cover very much," Hargraves said.
The administration is not adhering to the rules, Hargraves said. In response, several lawsuits have been filed to fight the extension of the plans.
The price consumers pay for the premium is a key determinant for choosing a plan, said Sara Collins, vice president of the health-care coverage and access program at the Commonwealth Fund, which studies health-care issues. Short-term health insurance definitely has lower premiums.
Since these plans do not fall under the regulation of the ACA, they have some freedom the ACA plans do not. Short-term health plans can bar people with pre-existing conditions as customers. They do not have to offer the essential benefits.
"These are the plans that the ACA sought to protect people from," Collins said.
Choosing this form of health insurance is likely to leave a person exposed to high bills, Collins added. The high deductibles reduce people's incentive to get needed health care.
"It's concerning, in terms of consumers walking into plans whose limitations they don't fully understand," Collins said.
People who use short-term health insurance are a fraction of the market. At the end of 2016, according to the National Association of Insurance Commissioners, 160,638 people had short-term plans.
The number is expected to rise, because many states will allow for renewals, and because of the end of the penalty for not purchasing ACA insurance, according to Louise Norris, a writer and health insurance brokerage co-owner at Colorado Health Insurance Insider.
This map shows how states regulate short-term insurance.
Quite a few states limit them to three months or six months, or prohibit renewals altogether, in addition to other restrictions, Norris said.
"States have received several consumer complaints about confusion and misinformation regarding their short-term or excepted benefit plans," said Julie Mix McPeak, NAIC president and Tennessee Commissioner of Commerce and Insurance.
There is a real risk consumers may confuse these short-term policies with health insurance that complies with ACA regulations. "It is important that [consumers] be made aware of any limitations to these policies during the sales process," McPeak said. "Educating consumers and ensuring they are aware of the limitations of these plans is paramount."
Short-term health plans can be a good option for people in transition.
"Whether between jobs, a recent college graduate or [if you are] an engaged couple," McPeak said. "These plans can also provide a more affordable option for those unsubsidized consumers that cannot afford individual coverage."
It's notably difficult for people to estimate what they'll need in health care, said Karen Pollitz senior fellow, health reform and private insurance at the Kaiser Family Foundation. Most people just don't know.
"We're better off working toward affordable coverage for everyone than creating affordable coverage for the healthy and leaving the sick behind," Kofke-Egger said. "Allowing expansion of short-term plans is a step in the direction of rolling back those protections."
Five things you may not know
Widespread uptake of these plans will mean more sicker people in the individual market, which will mean higher premiums.
Some short-term plans are adding features that make them look and behave more like ACA plans, Pollitz said. They may cover a limited number of visits to a provider, and provide for a limited number of days in a hospital.
When shopping, make absolutely sure to click into the details for information on the hospitalization benefit.
1. Pre-existing conditions need not apply
"Although the applications tend to be short and sweet, with just a few questions about major pre-existing conditions, the plans generally have blanket exclusions for all pre-existing conditions," Norris said.
If you develop a condition during the policy period, you will likely be unable to renew the insurance due to what is now a pre-existing condition.
2. No prescription drug coverage
Outpatient prescription drugs typically aren't covered or are only covered with a discount card.
"It's common to see short-term plans list prescription drugs under their benefits column, but when you look at the details, you'll often find that it's either just a discount card, or only coverage for inpatient prescription drugs," Norris said.
3. Brace for sky-high deductibles
Out-of-pocket limits aren't restricted the way they are with ACA-compliant plans, Norris said, so it's common to see deductibles of $10,000 and more.
4. You can't switch back to ACA right away
Also critical to remember, Pollitz said, is that "if you buy a policy with the expectation that you can go back to an ACA plan, you can't go back till next open enrollment."
When your short-term insurance expires or if the insurer refuses to renew your policy, this does not make you eligible for a midyear enrollment. In most states, that is November 1, with coverage starting January 1.
5. No subsidies
Since short-term health plans are not for sale on the marketplace, even if you're eligible for subsidies you cannot use them for these plans.