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Short-Term Plans Growing in Popularity

Short-Term Plans Growing in Popularity

A recent survey by Pivot Health finds that enrollment in short-term health plans is increasing amid the COVID-19 health crisis. Interestingly, the majority of people purchasing short-term coverage are not moving from an ACA-qualified “Obamacare” plan; in contrast, 26% of purchasers were previously uninsured.

It was last summer — July 19, to be exact — when a federal judge ruled in favor of the Trump administration’s expanded short-term plans, acknowledging “that the goal of the final rule was to allow short-term coverage to be sold ‘side-by-side’ with ACA coverage and that the final rule would undermine the ACA markets,” but disagreeing that increasing the duration of short-term plans from a maximum of three to 12 months would be “significantly destabilizing.”

In a post shortly after the ruling, AHCP explained that, while most of the short-term plans sold are not guaranteed-issue and do not cover pre-existing conditions, they are not “junk policies” and do, in fact, meet fundamental needs that some of our clients have: affordable and reliable protection against unexpected medical expenses.

We also pointed out that, with no individual mandate requiring people to purchase an ACA metallic plan, these short-term plans would grow in popularity among those who do not qualify for a premium tax credit. That has, in fact, proved true over the past year.

During the coronavirus outbreak, though, those who are signing up for these short-term policies fall primarily into two categories according to Pivot Health:

    1. “26% of short-term medical plan purchasers were long-time uninsured.”
    2. “29% had recently lost their insurance due to unemployment.”

According to the survey, it turns out that “Only 5% of purchasers had moved from an Obamacare plan to a short-term medical insurance plan.”

Among those who had recently lost their insurance due to unemployment, 75% decided against COBRA continuation because of cost, opting instead for short-term health insurance coverage. Of course, those who qualify for COBRA would also qualify for a special enrollment period in the individual market, where  a premium tax credit could help to offset the cost, but almost half (46%) of respondents say they “selected a short-term plan because they didn’t qualify for a subsidy or they needed something quickly.”

While Vox reports that House Democrats will soon “unveil a bill to dramatically expand COBRA subsidies for laid-off and furloughed workers,” there’s no guarantee that it will pass the House or be approved by the Senate. It’s also important to point out that not all workers who lose their health coverage qualify for COBRA. Firms with fewer than 20 employees are not COBRA eligible, and smaller firms with level self-funded plans also don’t even qualify for state continuation, so that increases the likelihood that workers who lose their jobs will opt for short-term plans.

And a lot of workers are losing their jobs, as evidenced by recent spikes in unemployment filings. In most cases, these job losses also result in a loss of health coverage. As Common Dreams reports, since the COVID-19 pandemic began, approximately 12.7 million workers have lost their employer-provided health insurance.

In other words, the high demand for short-term health plans is likely to continue for the weeks and months to come. Jeff Smedsrud, CEO of Pivot Health, summarizes the survey data by saying that “customers are more comfortable buying short-term health insurance plans than they ever have been,” and that “short-term health plans are becoming a general preference for individuals who need a budget-friendly healthcare solution as they maneuver through life transitions, unemployment or just need economical coverage.”

AHCP represents short term medical plans from four national carriers including Pivot Health. If you’re looking to add this to your portfolio, call us at 877-228-8773.

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