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5 Big Changes to Limited Duration Health Plans Beginning in 2019

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5 Big Changes to Limited Duration Health Plans Beginning in 2019

The CheckUp Team at

Updated: June 28, 2019    Published: November 8, 2018

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From 2017 to 2018, the federal government experimented with new rules that made it harder to use limited duration health insurance plans. During this time, short-term plans had to expire within three months.

On October 2, 2018, the government made it easier to use limited duration medical insurance by reversing these time limits. It’s now up to each state to choose the length of their “temporary”, “short-term” or “limited duration” health insurance plans, up to a maximum of 364 days. Based on these five new changes, is a short-term medical plan right for you?

1) Year-Long Short-Term Medical Plans Now Available

Short-term plans are exempt from expensive Affordable Care Act (Obamacare/ACA) rules, but a 2017 rule stated that short-term plans could only have 90-day terms.

The rule has been reversed starting in 2019, allowing so-called limited duration plans to be sold with terms that last up to 364 days. Even better, plans can build in automatic renewal periods that add an extra two years (allowing for a 36-month plan in total).

For people who only need coverage for a short time while handling a financial burden or overcoming an illness, flexible coverage length is ideal. It’s also great for those who plan on adding a longer term healthcare plan later, but cannot afford it or obtain it at present.

If nothing else, a short-term plan can give you piece of mind while you wait until you are financially ready for an ACA-style plan.

2) No Tax Penalty for Using Limited Duration Health Insurance Plans

If you plan on switching to a temporary health insurance option, wait until January 2019 once the Obamacare mandate is officially repealed.

From 2014 to 2018, people who did not have an Affordable Care Act plan or similar coverage had to pay a hefty tax penalty at the end of the year. Short-term plans did not protect you from this tax penalty. The money you would save by using a short-term plan was partially offset by the tax penalty.

In 2019, the tax penalty for going without Obamacare coverage will end. You will not face a tax penalty for enrolling in a short-term plan instead of an ACA plan. This makes it much easier to compare short term plans vs. ACA plans going forward.

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3) More Limited Duration Health Plan Rules, In Some States

Technically, as it stands, federal law does not prevent any person from simply enrolling in a new short-term plan after their current plan term ends. However, individual states do have the power to increase local regulations.

For example, Oklahoma still has a six-month limit and does not allow renewals. Your short-term provider will make local regulations clear to you in advance.

California, New York, New Jersey, Massachusetts, Rhode Island, and Vermont do not have any short-term plans available at present. These five states have extra requirements for health insurance, making it too expensive for companies to offer affordable short-term options.

Now that the states have the option to extend each short-term plan up to 36 months with renewals, it is expected that new plans will appear across the rest of the country.

4) Keeping an Eye on Short-Term Health Insurance

You can rest assured that short-term health insurance plans are going to have an eye on them at all times.

Why? Because we already know that short-term plans cover less than Obamacare health insurance, so officials want to make sure that short-term plans are not misleading Americans about what they do cover.

Regulators are ready to make sure that short-term coverage and sales are legal and moral.

Even though the plans do not have to follow Obamacare rules about covering pre-existing conditions, they are still owned by companies which have to follow non-discrimination laws, tax laws, and consumer protection laws. The time limits for plans have been extended now that states have shown they can pay close attention to temporary health insurance. man in unraveling cast page divider

5) The Cheapest Option for the Young and Healthy

Since short-term health insurance plans can last as much as three years with renewals, more and more people are expected to enroll. These plans are a much cheaper option and potentially a smart decision for people who are healthy and young – especially since the requirement to carry ACA plan insurance is set to end in 2019.

Since short-term plans are not ACA-regulated, they are not required to cover any specific medical costs. This is why short-term plans can often be cheaper than ACA plans – they don’t typically address items like pre-existing conditions and mental health.

Short-term plans frequently enroll people between the age of 40 and 64. However, pre-existing conditions and frequent plan changes are generally issues that young and healthy Americans do not worry about nearly as much as early retirees, leading more young Americans to consider short-term plans.

Is It Time for You to Get Limited Duration Health Insurance?

There are definitely pros and cons to hundreds of thousands of people leaving the Obamacare market in favor of short-term plans. “It can be very good insurance,” says co-founder Jeff Smedsrud, “but it’s also not a solution for everyone.”

Temporary Health Insurance Is Cheaper Than ACA: On one hand, the federal government will no longer have to subsidize as many health insurance plans. On the other hand, this means that more healthy people will be leaving ACA plans, which means ACA plans will be made up of mostly sick and elderly people, which means higher costs for Affordable Care Act coverage.

This will be a bit of a “wait and see” game to see what happens to the ACA as a result of this change.

Temporary Health Insurance Is NOT For Everyone: Of course, the biggest “con” to temporary health insurance is that these plans are not required to cover the essential health benefits, like maternity care and substance abuse treatment, that all Affordable Care Act plans are required to cover.

Short-term plans are also not required to provide coverage to all applicants. That means that you can be denied temporary coverage due to preexisting conditions.

Be sure to read the rules of your short-term plan carefully to check if it covers everything you need. Click To Tweet

Additionally, because short-term plans do not fall under Obamacare enrollment rules, you will may not have the option to enroll in a new ACA plan as soon as your short-term plan ends; you would have to wait until the next open enrollment period to enroll in an ACA plan.

Easy to Get In Many Circumstances: Still, it’s absolutely better for any person to have temporary health insurance as opposed to not having any coverage at all. That’s why if you need a financial break but make too much money to qualify for ACA subsidies, short-term healthcare is an option.

Ready to look at short-term insurance options in your area? Enter your ZIP code below to get free, no-obligation quotes from trustworthy short-term companies.

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