What is ‘junk’ health insurance?
What is the value of short-term health insurance?
What are the pitfalls of short-term health insurance plans?
Can I escape?
What does the future hold?
What is ‘junk’ health insurance?
‘Junk’ insurance is an insurance plan that does not cover any loss or expense you could reasonably expect or have been led to expect to be covered by the policy. In particular, in health insurance, the term refers to insurance plans that do not offer coverage at least equivalent to those compliant with the Affordable Care Act (ACA).
Typically, these ‘short-term’ plans do not cover the ten essential health benefits (EHBs), exclude pre-existing conditions, have high deductibles, and do not set limits to Out-of-Pocket expenses (OOP).
What is the value of short-term health insurance?
Short-term, Limited-Duration Insurance (STLDI) was intended to provide adequate coverage for short periods (up to three months) to ensure that individuals could obtain coverage during periods between long-term coverage, e.g., when changing jobs or aging off a parent’s plan. As such, it provided a relatively inexpensive way to provide short-term (interim) health insurance coverage.
The rules allowed consumers to renew their plans for up to three years to provide some flexibility. Unfortunately, this has been interpreted as an opportunity to market low-premium, high-deductible, limited coverage plans, which, despite not qualifying for premium tax relief, do attract some consumers—they may save hundreds of dollars if nothing happens but cost them tens of thousands if it does!
What are the pitfalls of short-term health insurance plans?
If you need short-term health insurance, your first step should be to discuss your situation with an independent, qualified health insurance broker or agent. You may be right, and short-term health insurance is the right course of action for you; the reassurance will cost you nothing.
You should be cautious if the price seems cheap. Look very carefully at the exclusions.
Can I escape?
- Carefully examine your policy to clearly understand the exclusions and the coverage limits in light of your possible medical or healthcare expenses during the anticipated life of your current (short-term plan). Do not hesitate to take independent advice from a health insurance broker or agent.
- Contact your insurance provider to discuss your concerns about your coverage.
Depending on your position following these discussions, you have the following resources to turn to: –
The Consumer Protection Agency if you think you have been misled.
The Financial Ombudsman if your concern is related to a refund.
You may be one of many with a similar complaint. Check with your Insurance broker or legal adviser to find out if there is a class action that you can join.
What does the future hold?
Nobody chooses to pay more than necessary to secure the level of health insurance they need to protect themselves and their loved ones. Given the many medical and healthcare costs that can result from illness, traumatic injury, or chronic disability, it is hardly surprising insurance providers compete to offer health insurance coverage at the lowest possible prices.
The consequence is that some plans, e.g., STLDI policies, while legal, do not provide the long-term standards set by the Department of Health and Human Services (HHS) and are not generally subject to the appropriate federal protections and requirements for comprehensive coverage.
The aim of the HHS, through the Affordable Care Act and with federal and state subsidies, is to lower the costs of healthcare and protect consumers from being ‘scammed’ into purchasing lower-quality or ‘junk’ health insurance. Over 80% of US citizens who enrolled for the 2024 insurance year were able to select from healthcare insurance options that were $10 or less (CMS.gov).
While short-term health insurance is needed, the HSS is “closing” loopholes that can mislead consumers into purchasing plans that are not ACA-compliant and do not qualify for federal or state subsidies (tax relief).
In addition, the ‘final’ rules, published on March 28, 2024 (effective September 2024), state that short-term health insurance plans will be limited to three months and extended only once by a further month (previously up to three years).
The reason why you are considering or have signed up for a short-term plan may also have triggered a ‘personal’ Special Enrolment Period, i.e., 30 days in which to sign up for a replacement ACA-compliant plan. Don’t miss the opportunity.
Contact a qualified health insurance broker or independent agent before you decide what to do next.
