Are Short Term Health Plans ACA (Obamacare) Compliant? Short Answer, No.
Now that the end of the first enrollment period for the Affordable Care Act (ACA) has passed, there is an opportunity to take a moment and examine what this means in the market. While reports are boasting higher than expected enrollment, there remain millions of consumers who have yet to sign up and receive their confirmation of coverage. What does this mean, then, for the uninsured? What options do they have available to them to obtain health insurance before the next open enrollment period in November?
Providers are offering what is called a short-term health insurance plan. While this is not a new product, it continues to serve as stop-gap coverage. In exchange for a lesser monthly premium, coverage is limited. It has always been an attractive option for a number of consumers, such as:
- Young adults coming off their parents policies who have not yet made a decision about obtaining their own policy
- Young adults starting graduate school or graduating college
- People just starting a new job wherein their employer-provided coverage does not begin for at least 90 days
- And now, people who missed this enrollment period and must wait until the next one
Limitations To Be Aware Of
This limited coverage, short-term plan is not as expensive as a major medical health insurance plan. The short-term policy can last as few as 30-days, 6-months or longer. It does not function quite the same as a typical health insurance plan. Renewals are not automatic. In fact, policy-holders must reapply each time coverage is extended and be evaluated as if being written for the first time. This means there is a possibility of being declined if there has been any significant change in the health of the applicant. In many ways, it is not written to be anymore attractive than the short-term, better-than-nothing option. Otherwise, people would find the pricing too appealing to cease.
Insurance companies or agents selling short-term policies apprise consumers of these limitations. Still, most people do not understand the limited scope until it comes time to make a claim. There are two fundamental differences in relation to the ACA:
- Coverage is strictly bare-bones making it non-compliant with the minimum essential coverage, and because of this, it is not ACA (Obamacare) compliant.
- It is not exempt from the mandated tax penalty of $95 or one percent of household income, whichever is higher.
The ACA Seeks to Fix Many Issues
The ambitious goals of the ACA are intended to satisfy the needs of both the consumer and the insurance provider. To that end, policies have been mandated to offer minimum essential coverage while the fixed enrollment period and imposition of a tax penalty were implemented to encourage enough people to sign up expeditiously. There remains significant confusion in a market that is known for having a lot of information to digest. In fact, it is characteristic of most people never to read their policies until it comes time to make a claim. A good agent works to promote a better understanding.
Health insurance is no more an instrument that keeps people healthy than car insurance makes people better drivers. Some people are willing to use their insurance policies as financial instruments to help protect their personal assets. This is really no different for the insurance companies attempting to remain solvent by making sure there is a sufficient pool of resources to pay claims. This is precisely why there is no longer open enrollment while the industry works to evaluate the current rates based upon the latest data pertaining to how many will be paying their premiums.
Exceptional Circumstances and Qualifying Events
People must not lose sight of the fact that there are still opportunities making it possible to place coverage with an approved plan in between enrollment periods. Some of these exceptional circumstances are:
- Natural disasters
- Unresolved casework or enrollment errors
- Married victims of domestic abuse
Some of the qualifying events are:
- Getting married
- Losing a job that had previously provided coverage
- Having a child
At the end of the day, there is one phrase that sums it up for consumers: Buyer beware. Read as much as you can about your plan, ask as many questions as you can think of and be mindful of the enrollment periods as they pertain to you. In the meantime, a short-term plan can be there just in case.
An excellent resource and website that has great information regarding all of the possible qualifying events can be found at ObamacareQualifyingEvents.com