April 18, 2014:
With the deadline now past to sign up for coverage under the nation’s new health care law, there’s one last resort for the millions of uninsured: short-term health insurance.
Insurance providers are now shifting their sales pitches to such Band-Aid policies, which health care experts agree are better than nothing but come with a litany of caveats.
These policies provide bare-bones coverage, usually don’t insure people who have pre-existing conditions and may be impossible to renew after an illness. And they won’t prevent Uncle Sam from hitting you with a tax penalty for not complying with the Affordable Care Act.
“These are not major medical health insurance plans, but it does give you some level of coverage if you have no other options,” said Brian Mast, vice president of communications for eHealth, a Mountain View-based online health insurance marketplace that offers three companies selling these plans in California.
For years, short-term health insurance has been a mainstay for people who are between jobs, new employees waiting for their benefits to kick in, retirees under 65 waiting on Medicare and young adults, among others. Because they offer limited coverage, short-term plans are far less expensive than normal plans.
“So it’s fail-safe coverage for some injury or illness of a serious nature that occurs during this period,” said Patrick Johnston, president and CEO of the California Association of Health Plans, which represents 42 health plans in the state, including all 11 offered on the Covered California insurance exchange.
But under the Affordable Care Act, also known as Obamacare, short-term plans don’t offer minimum essential coverage. If it’s the only health plan you have, you will still be subject to the health care law’s tax penalty of $95 or 1 percent of your household income. Those who missed Tuesday’s deadline to sign up for comprehensive insurance will have to wait until Nov. 15 to sign up for coverage that starts Jan. 1.
Janice Rocco, deputy commissioner of health care policy for the California Department of Insurance, said short-term policies are considered health insurance under state law. By their very nature, however, they are not compliant with the health care law.
While insurance companies selling these policies are required to notify consumers the plans don’t constitute minimum essential coverage, many consumers may not understand the limited scope.
In a survey of 261 short-term policy holders last March, eHealth asked if they believed short-term health insurance would fulfill their coverage requirements under the health care law. Twenty percent said yes, 16 percent said no and 64 percent said they did not know.
Still, in the same eHealth survey, 79 percent of short-term policy holders said they liked the relative affordability of short-term coverage most. Thirty-five percent said they liked the ease of canceling their short-term coverage when they no longer need it. And 29 percent said short-term plans cover the medical services they value most. A similar number, 28 percent, said they liked that it was relatively easy to qualify for short-term insurance.
Larry Hicks, a spokesman for Covered California, the state’s health insurance exchange, reminded consumers the only way anyone can enroll in or amend a comprehensive insurance plan this year is if they experience a “qualified life event” like marriage, the birth of a child or the loss of a job.
Under the health care law, new insurance policies include a number of advantages. Insurers no longer can deny coverage to anyone with a pre-existing health condition. They also must offer coverage to children until age 26 under their parents’ plans, and all policies must provide 10 essential health benefits, including mammograms, mental health services and prescription drugs.
Short-term policies, which can be issued for as few as 30 days to six months and sometimes longer, usually don’t cover routine physicals, exclude coverage for conditions that have been diagnosed or treated within the past three to five years and have lifetime limits on benefits, which is now prohibited under the health care law.
But are they better than nothing?
“If you are concerned about coverage in the event of a terrible accident or a new diagnosis, then yes,” said Marian Mulkey, a director at the California Healthcare Foundation.
She encouraged consumers buying any kind of health insurance to study their policy closely.
“It’s buyer beware. Read the fine print and know what you will actually be getting in the short-term policy,” said Mulkey, “because they may not be as comprehensive as those you have been used to if you ever had employer coverage or an HMO plan.”