Would these policies make sense for all clients?
As lawmakers debate the fate of the Affordable Care Act, agents confront the very real possibility of their clients losing health care coverage if the ACA is repealed without an immediate replacement. In that event, clients may look to short-term health insurance plans to cover their medical needs until a new law is drafted to replace the ACA.
Whether short-term health plans benefit your clients depends on a variety of factors, including affordability, health status, the length of the policy, and the comprehensiveness of the coverage.
What Are Short-term Health Policies?
The latest figures from the National Association of Insurance Commission show in 2015, approximately 148,000 short-term health insurance contracts had been purchased, while short-term premium earnings hit $160.5 million. Both those figures represent an increase from 2013 — a year prior to the ACA taking full effect — when the numbers were 108,800 and $97.5 million, respectively.
As the name implies, short-term health plans work for a specified period of time, although the explicitly permitted duration varies. Some contracts cover policyholders for 364 days, which allows the policy to qualify as short-term because it does not provide coverage for a full year.
However, federal guidelines implemented last year by the Obama administration capped the coverage period for short-term plans at less than three months. This rule only applies to new policies, as short-term contracts signed before Jan. 1, 2017 will continue to their original termination date, according to HealthInsurance.
In addition to length, short-term health plans differ from contracts covered by the ACA. Since such contracts fall outside the ACA law, short-term term policies include a limit on maximum lifetime coverage, typically up to $1 million. Most importantly, this means that short-term policies can deny medical benefits to policyholders with pre-existing conditions — or, if a medical complication arises during the short-term plan’s coverage period, the insurer may decline to renew the short-term policy.
Conversely, short-term premiums are generally cheaper than those found on the ACA exchanges. But those savings may be negated by the tax-time penalty for not having ACA-compliant health insurance coverage.
A Bridge to a New Mandate?
Republican lawmakers have proposed several alternatives to the Affordable Care Act, but so far have not agreed on a plan or a timeline for implementation. While some legislators want an immediate repeal and replacement of Obamacare, others prefer to repeal now, but want to wait a year or more to enact a replacement law.
Therefore, policyholders currently covered by short-term plans must decide whether to renew ahead of a new health care mandate. The same holds true for clients who face a gap in their coverage.
Know Your Client
Agents must educate their clients on the pros and cons of short-term health plans, and this guidance requires knowledge of each client’s medical status.
Clients with pre-existing conditions may be unable to qualify for short-term coverage. Also, short-term policies offer limited coverage — unlike ACA exchange plans, short-term insurance does not cover routine medical visits, mental health counseling, or preventative care. Accordingly, clients with chronic medical conditions may be ill suited for short-term plans.
Remember, too, that even if a client qualifies for a short-term plan, whether he or she can renew is up to the discretion of the insurer. So it’s not guaranteed that policyholders can continually renew their short-term policies.
Nevertheless, short-term health insurance provides relatively healthy clients a robust menu of medical services, including surgery, physician, outpatient, and inpatient care. Doctor and hospital choices are unrestricted, but policyholders may be awarded financial incentives if they choose in-network providers.
As with any insurance purchase, the final decision rests on value. For some clients, the affordability of a short-term plan outweighs the potential risk of paying a tax penalty. These clients also have the security of knowing they have access to at least some health coverage in 2017 until a replacement is put into effect. Regardless of your client’s particular needs, however, it’s your job as an agent to act as a helpful and caring health insurance resource.