Short Term Limited Duration insurance policies were originally created as an option for individuals who are between health insurance plans, such as temporary unemployment or reaching an age where a parent’s insurance no longer covers someone. While they are less expensive than Affordable Care Act (“ObamaCare”) Plans, they cannot be renewed, (a new policy and a new application must be filled out each time), they have extensive exclusions for preexisting conditions, they last for a limited duration (between three and eleven months), and are more limited on what they cover for the consumer.
For Alabama, there are currently 17 different short-term insurance products available for purchase, but the majority are not covering medical scenarios that are still very important. 71% of these policies cover mental health, 41% cover substance abuse treatments, 24% cover prescription drugs (usually with an annual cap of $3000), and none of the policies cover maternity care.
Regulations Set to Expand Short Term Plans Again
In conjunction with the implementation of the ACA around 2014, many companies began offering short term major medical plans. While these companies marketed these plans as more affordable but similar coverage to Obama Care policies, they were not similar at all. They did not meet the minimum essential insurance requirements of the ACA and contained drastic pre-existing conditions exclusions.
Due to these bad developments, the Department of Health and Human Services passed regulations that limited these plans to a maximum of three months. Because of this regulations, many insurers stopped selling these type of policies.
In February of 2018, the decision was made by the HHS to expand the availability of short term coverage for citizens, as well as expanding the length of coverage time. These insurance policies now allow for any coverage period less than a year. People have also been allowed to disobey the ACA ruling for minimum coverage for 2018 for up to 12 months, while awaiting the repeal to go into effect at the start of 2019.
Comparing Short Term Insurance to Normal Health Insurance
- Applicants can be turned down or charged higher premiums based on their health status, condition, gender, age, and other factors, with no cap
- Coverage can be excluded for anything that can be classified as a pre-existing condition
- Certain health benefits do not have to be covered such as maternity care, mental health, preventive, or prescription drugs.
- Can have lifetime or annual limits on how much they will cover
- Do not have to follow normal cost sharing limitations and charge higher
- Do not have to comply to other ACA requirements like rate reviews or minimal medical loss ratios.
When Short Term Plans Are Sold As Long Term Insurance Replacements, They Are Bad for Policyholders
Short term insurance policies have often been advertised as a proper substitute for ACA insurance, but they don’t fit the bill. These policies can be very profitable for the companies that sell them but often do not provide adequate insurance for policyholders. Many of the companies that sell these policies engage in aggressive reverse underwriting in which they only request medical records after a claim is filed and look for conditions that they can use a reason to cancel the policy or deny the claim. They can also refuse anyone for any reason. On top of that, caps on benefits, limitations on what parts of health care they cover, and poor claims service only make these policies more unsuitable for the American people.
Although cheaper insurance can be appealing to the healthier and younger crowd, short term insurance policies should not be first choice. They offer reduced benefits, have low caps on what the insurance company has to reimburse and the policyholder must fill out a new application each period. In addition, companies often deny claims alleging that they are caused by pre-existing conditions, give insureds the run-around, and take months and sometimes years to pay claims.
Schedule a Free Consultation with a Birmingham, Alabama Insurance Bad Faith Lawyer
Johnstone Carroll is here to help those with insurance claim issues and those who need advice. We have helped many clients choose the right coverage for them. We have also helped many clients fight insurance companies to get the compensation and coverage they deserve. If you have any questions about your insurance claim or have been taken advantage of by a short term insurer, feel free to give us a call at 205-383-1809 or contact us here.
The articles on this blog are for informative purposes only and are no substitute for legal advice or an attorney-client relationship. If you are seeking legal advice, please contact our law firm directly.