Short-term health insurance is medical insurance that provides coverage for less than 365 days. After the passage of the Affordable Care Act, the Obama administration limited this type of coverage to less than 90 days. On Aug. 1, 2018, the Trump administration released a ruling which allows the public to purchase short-term health insurance up to one year, reversing the Obama administration ruling. The new policy also allows the short-term insurance to be renewed twice, essentially allowing coverage to extend up to three years.
The Obama administration’s decision in 2016 to limit coverage to 90 days was a result of the mandates of the ACA. Under the ACA people without health insurance that provided adequate coverage for more than three months were required to pay a penalty of 2.5 percent of their income. The intent of this requirement was to encourage young, healthy people to purchase health insurance. Since these individuals generally have low healthcare costs, their medical premiums were intended to offset the costs of providing care to older people and to those people with pre-existing conditions. The option for healthy people to obtain inexpensive, short-term coverage would undermine the ACA.
Short-term health insurance does not need to comply with the ACA requirements, including the ACA’s essential health mandates. For example, it does not need to cover psychiatric problems, substance abuse, or maternity care. Applicants for short-term insurance can also be excluded if they have pre-existing problems. Large deductibles, high copays, and low caps are the rule. Policy holders who become sick while under these policies will have large out-of-pocket costs and will probably not have their policy renewed.
However, the premiums are far lower than the more comprehensive ACA compliant policies. Short-term policies provide an option for healthy people who are looking for interim coverage between jobs or for people awaiting Medicare.
The Trump administration, by extending short-term coverage for up to three years, goes along with its plan to rescind the penalty placed on uninsured people and by allowing association health plans for small businesses that are not ACA compliant. These measures are part of a continuing plan to dismantle Obamacare.
The ACA did succeed in extending coverage for many Americans, but it did so chiefly by easing requirements for Medicaid eligibility. The majority of people who are now insured are on state programs. The ACA has been unsuccessful in halting the sky-rocketing increases in private insurance premiums, especially those obtained on the ACA state exchanges. Although increases in premiums for insurance obtained on the exchanges vary from state to state, they are generally rising by double digit percentages each year.
Extending the length of time for short-term insurance provides an option of marginal real benefit to some healthy people. But it does little to control rising healthcare costs. Unfortunately, neither did the ACA.
Unaffordable care is essentially unavailable care. Until the fundamental reasons for our overpriced healthcare system are addressed, states should tread carefully in expanding short-term plans.
Dennis Gottfried, M.D., is an assistant professor of medicine at the University of Connecticut Medical School. He is the author of Too Much Medicine, (Paragon Press, 2009).
