Short Term Insurance Plans Morph Into Long Term Plans With Limited Mental Health Coverage

Short term insurance plans have been providing people with temporary insurance coverage for decades.  Historically, they have been transitional policies that are not required to provide mental health coverage or coverage for preexisting conditions. Changes made this year allow these plans to provide coverage for up to a year instead of the three months previously authorized, and now they can be renewed for up to three years. Previously, one three-month policy was the limit.  You can read the official announcement from the Department of Health and Human Services about these changes (the “final rule”) here.

Short term plans are not required to provide the protections that the Affordable Care Act requires in traditional individual policies.  Short term plans are not required to provide coverage for preexisting conditions, mental health or substance use disorder (SUD), or they can charge higher premiums for consumers with these conditions.

Opponents say the plans will appeal to younger, healthier consumers and therefore leave traditional plans covering more older, sicker individuals which will drive up rates for everyone in those plans.  For all these reasons the American Counseling Association, along with other national groups, signed a letter opposing the recent changes to short term plans. The more people who have insurance for mental health, SUD, and preexisting conditions, the better it is for professional counselors.

Kaiser Foundation Study

Supporters say short term plans provide a cheaper alternative for people who cannot afford or don’t expect to need all the coverage required in a traditional individual plan. The Kaiser Family Foundation just released a study of the premiums paid for short term plans compared with the premiums paid for traditional long-term individual insurance plans. The study found that “short-term plans could provide coverage with fewer benefits at premiums 54 percent lower than ACA-compliant plans. However, the bulk of these premium savings result from exclusion of people with pre-existing conditions, for whom short-term plans are not an option.”

The Kaiser study concluded that, “the lower premiums will likely prove attractive to people who are healthy, especially those buying their own coverage now who have incomes too high to qualify for ACA premium subsidies. If such individuals opt for short-term plans and then become seriously ill or injured, however, they could face higher out-of-pocket costs.”

States Step In

Short term plans are not required to provide Affordable Care Act coverages because they are regulated by the states.  Several states have begun to take steps to regulate the new, longer-term short term plans.  Washington State Insurance Commissioner Mike Kreidler, citing consumer "horror stories," announced last month that the State of Washington will:

• limit short-term plans to three-months;
• prohibit renewals of certain short term plans, and;
• require a number of consumer protections, essentially replicating many of the rules put in place by the Affordable Care Act.

The November elections gave the majority in the House of Representatives to the Democrats. It is rumored that they will investigate changes in short term plans as part of a larger look at steps the Administration has taken to offer alternatives to Obamacare that may weaken the program.

You can read more here about the pros and cons of short term plans .