Insurance Commissioner: Consumers should be wary of short-term health plans

Tuesday, August 9, 2016

From the Office of the State Insurance Commissioner

Consumers looking for health insurance outside of the annual open enrollment period should be wary of short term disability plans. These plans may be marketed as alternatives to Affordable Care Act (ACA) health insurance, but they could leave you without adequate coverage and facing financial penalties at tax time.

Originally, short-term disability plans were sold as a stop-gap measure until you could get real major medical coverage. After the ACA kicked in, people had many other options for coverage, but these limited plans were still being marketed to consumers as a viable alternative.

However, short-term disability plans do not count as 'minimum essential coverage' under the ACA - meaning you'll have to pay a tax penalty. They also do not cover the 10 essential health benefits, can limit your annual benefits to $100,000 or less, and deny you coverage for any pre-existing conditions.

These policies are sold year-round, unlike ACA-plans that must be purchased during the annual open enrollment period, unless you qualify for a special enrollment. Some states allow for coverage to last up to a year and policies can be renewed. This effectively takes people out of the insurance pool that the ACA was designed to expand, leading to increased costs for everyone.

In an effort to bring the limited short-term health plans back to their original purpose and to protect consumers, the federal government is proposing a regulation to limit the duration of these policies to three months and increase consumer awareness of their limitations.

Insurance Commissioner Kreidler agrees with this effort and sent a letter yesterday in support of the new regulation.


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