For those who qualify, short-term health plans can be a great alternative to ACA compliant individual plans, especially now that the individual mandate penalty has been reduced to zero. True, short-term plans do not cover preventive care or pre-existing conditions, and they are not guarantee issue like individual plans are, but they do offer much lower monthly premiums than individual plans.
And now that the administration has increased the maximum length of a “short-term” plan to twelve months, with the ability to renew for up to three years in many states, individuals who use utilize health care less, do not have chronic conditions, and have a tight budget may have the opportunity to save on their health insurance one year at a time.
The problem, of course, is that most short-term plans are significantly more expensive when the client chooses a term longer than 180 days. This makes it tempting to purchase a shorter-term policy and renew or rewrite it in the middle of the year. That’s a fine strategy for those who are still healthy, but individuals who develop a medical condition during the first term might find themselves without any options at that time. It’s much less risky when the timing of the renewal/rewrite coincides with the individual open enrollment period.
For that reason, it probably makes sense to go with a longer-term policy. Yes, it’ll cost the client more money, but he or she will still save versus the cost of individual coverage and won’t be at risk of not having any coverage at all in the middle of the year.
The exception to the strategy of purchasing short-term coverage that lasts through the end of the calendar year is when someone is buying short-term coverage to get through a short-term gap in coverage. If an individual is starting a new job and needs coverage during the 90-day waiting period, for instance, a shorter term would be ideal. The same would be true for a young person who needs coverage until school begins and he or she can sign up for student coverage through the university.
Long story short, the answer to the question about shorter versus longer short-term plans depends on the client’s situation. If you’re simply helping the client fill a short gap in coverage, then the policy should last until the new coverage begins. If, on the other hand, your clients want you to help find them an alternative to coverage in the individual market, it’s less risky (but more expensive) for the policy to last through the end of the year.
Either way, AHCP can help. Check out the Carriers page on our website for information about the short-term plans available to your clients.