Federal Regulations Transform Short Term Medical Market
Effective April 1st, new Federal Regulations require a reduction in the coverage duration of Short Term Medical plans to a maximum of three months. To understand the impact and reasoning behind these new compliance measures, we provide a bit of context and history regarding this market.
Short Term Medical plans originally were created as a stop-gap coverage for individuals trying to obtain insurance for a limited or specific period of time. These plans were extremely useful for a person who had recently changed jobs and were subject to a waiting or probationary period before they were eligible to join their new employer’s health insurance offering. Before the Affordable Care Act (ACA) was passed, employers could stretch out this probationary period up to 6 months. Now, under the ACA, that waiting period is limited to a maximum of 60 days.
However, over the past few years the Affordable Care Act has pushed numerous clients into the Short Term Medical market in an unforeseen ways. With double-digit premium increases in many markets, folks have chosen to enroll in Short Term Medical plans and pay the penalty for not carrying ObamaCare compliant coverage because it would be much less expensive going that route compared to enrolling an Individual plan. Short Term Medical plans don’t cover pre-existing conditions or preventive care – therefore, what you get is a fairly healthy population gravitating towards these options as a way to circumnavigate paying top premium dollars for a more comprehensive health plan. Ultimately, pushing out some of the healthier risks exchanges are trying and have failed to fully attract.
Conversely, there are also those folks that enrolled into a Short Term Medical option thinking that they were satisfying the Individual Mandate, only to find out at tax time that they were going to have to pay the penalty for not carrying compliant coverage. In the past two years, we’ve really seen Short Term Medical carriers become more transparent and forthright regarding language relating to their product lines not being ACA compliant in an effort to limit this circumstance from occurring. Federal Regulators, banded together to address the issues of driving more healthy folks to the Individual Market and limiting the negative consumer experience of enrolling into this product mistakenly. Because employers can only implement a 60 day waiting period, they used that as the backbone to come up with a maximum duration for these Short Term Medical options – they settled on 90 days.
While the overall market share of US citizens participating in these markets is fairly minimal, the impact will be firm, forcing them into the Individual market – or that is the hope behind these new regulatory policies.
In Washington State, as Short Term Medical has become more popular over the past few years, we’ve really seen adverse effects at the carrier level. Specifically, premium increases and several carriers dropping from the market. At the time of this writing, there is now only one carrier offering Short Term Medical plans in Washington State. You can still enroll into a Short Term Medical plan at any point throughout the year, but now, you won’t be able to stretch it around the calendar as was able to be done previously.