The Centers for Medicare and Medicaid Services (CMS) on Aug. 1 extended the length of time you can keep a short-term policy from just 90 days to one year. In addition, you’ll be able to renew the same short-term policy annually for up to three years.
Short-term, limited-duration insurance is a type of health insurance coverage that was primarily designed to fill gaps in coverage that may occur when an individual is transitioning from one plan or coverage to another plan or coverage, such as in between jobs. This type of coverage is exempt from the definition of individual health insurance coverage under the Patient Protection and Affordable Care Act (PPACA) and is therefore not subject to the PPACA provisions that apply to the individual market.
This is good news for families and individuals wrestling with soaring health insurance premiums: The federal government just made it easier to buy and maintain lower-priced, short-term health insurance. The changes are the latest tweaks to the Affordable Care Act (ACA or Obamacare) made by the Trump administration aimed at giving middle-class consumers access to more affordable health insurance. The announcement reversed a 2017 Obama-era rule that had reduced the coverage window of short-term insurance from one year to 90 days.
Short-term health insurance is 80 percent cheaper than non-subsidized, Obamacare coverage, according to a study eHealth published in August. The same study found that the average monthly cost of ACA insurance for a family of four that didn’t qualify for an Obamacare subsidy was $1,376 — up 15 percent from 2017 and more than 60 percent higher than the same policy in 2014, when Obamacare was launched.
“We continue to see a crisis of affordability in the individual insurance market, especially for those who don’t qualify for large subsidies,” said CMS Administrator Seema Verma in a statement announcing the rule change. “The final rule opens the door to new, more affordable coverage options for millions of middle-class Americans who have been priced out of ACA plans.”
Short-term health plans are cheaper, in part, because they aren’t required to include all of the benefits mandated by the ACA and, as the name implies, they’re only guaranteed for a limited amount of time. The plans originally were designed for people facing temporary gaps in medical coverage, and this remains the primary reason people buy short-term policies. But a growing number of consumers are turning to the policies as a longer-term solution as premiums for non-subsidized ACA plans continue to rise.
‘Greg Says’ considers short-term health insurance plans to be a credible alternative to ACA-compliant plans particularly for those 63 and 64, approaching Medicare. These plans are under-written so they’re not available to those with serious health issues and they exclude pre-existing conditions. But for those able to qualify, they have lower premiums and lower deductibles than the ACA-compliant plans.