Since the Affordable Care Act took effect in 2013, a lot of consumers have had legitimate questions about the logistics of the new law. Most people in America had some type of coverage before the law was signed in 2010, but the ACA wasn’t created solely to offer options to the uninsured. Its secondary goal was to increase consumer protections and hold insurers accountable for their actions.
To work effectively, the ACA depends primarily on taxpayer funding, which means that those who don’t buy health insurance will have to pay up during tax time each year. In an effort to avoid this penalty tax, some people have signed up for cheaper short-term health plans or STHPs. Offered by many major medical insurers, temporary health plans may lull some into a false sense of security. There are situations in which short-term insurance fulfills a need, but you need to know that these plans do not comply with the new healthcare law’s requirements.
Bridging the Gap
Short-term health plans are designed to bridge the gap between coverage periods. If you get a new job, for instance, and you’re waiting on a new work-based policy to kick in, then you might sign up for short-term health insurance to make sure you can see a doctor if you get sick in the meantime. Recent college graduates, young adults who age out of their parents’ coverage and people who need proof of insurance for travel or charity work may also enroll in STHPs until they find long-term coverage. In addition, people who missed the open enrollment period for the ACA may opt for short-term coverage until the next period starts.
Rights and Protections under the ACA
Under the Affordable Care Act, you can expect better protections against unethical or unfair insurance practices. You’re also guaranteed more rights and better coverage. Things like wellness checks with your doctor, routine cancer screenings, children’s health care, mental health services, prescription drugs and hospitalization are all covered under new plans thanks to the “ten essential benefits” provision of the ACA. Insurance companies can’t deny coverage to people with pre-existing conditions, and you won’t be dropped from your policy without a good reason and without warning. Unfortunately, these and other protections only apply to major medical insurance.
How STHPs Differ from Major Medical Insurance
Aside from the length of the policies, there are a few important differences between short-term health plans and major medical insurance. For starters, short-term plans have cheaper premiums but higher deductibles and increased out-of-pocket costs. Major medical plans require an in-depth enrollment process whereas STHPs take a few minutes. If you enroll in a short-term plan, you may not be able to re-enroll in that same plan when your coverage ends. You can also be denied coverage based on a pre-existing condition. On the other hand, you usually have to sign up for major medical insurance during open enrollment. With STHPs, you can enroll anytime.
A Plan that Works
If you don’t enroll in a major medical insurance plan during the open enrollment period, then you’ll be charged the penalty tax by the IRS when you file your taxes each year. Unless you qualify for an exemption or a special enrollment period, you’re out of luck. However, even though short-term health plans don’t qualify as minimum essential coverage under the ACA, they can act as filler until the next open enrollment period starts. You’ll still be charged the tax for every month that you lack coverage, but at least you’ll have some health insurance available just in case.