Consumer Advisory: Short-term health plans can fall short
Not covering pre-existing conditions and the limits on benefits could leave consumers with big medical bills.
DENVER (August 1, 2018) – Short-term health insurance plans, also called limited duration policies, may look attractive because of their low monthly premiums. However, consumers need to weigh those low premiums against the limited benefits in such plans to determine if short-term plans truly fit their health and financial needs.
So how could inexpensive health insurance plans be a problem?
“Short-term plans are cheap for a reason - they typically exclude pre-existing conditions that people have and they can cap the amount of coverage they provide,” said Colorado Insurance Commissioner Michael Conway. “Because many people will need more coverage than these plans offer, what consumers end up paying out of their own pocket could easily surpass any savings from low premiums.”
As the Federal government has released new rules loosening restrictions on these plans, the Colorado Division of Insurance, part of the Department of Regulatory Agencies, wants people to be aware of the many shortcomings of short-term plans.
Comparison of Features - ACA-compliant health plans* & Short-term plans
|Coverage / Feature||ACA-Compliant Plans||Short-Term Plans||Considerations|
|Discriminate against applicants due to pre-existing conditions / health history.||NO||YES||Short-term plans can deny coverage or exclude coverage for pre-existing conditions.|
|Provide Coverage of Essential Health Benefits, including prescription drugs and other routine services||YES||NO||Short-term plans can exclude benefits such as in-patient hospital stays, outpatient surgery, and prescription drugs.|
|Allow dollar limits on coverage||NO||YES||Short-term plans can set coverage limits for the policy period for things such as hospital stays or surgeries.|
|Provide preventive care at no cost to members||YES||YES, but exclusions apply||Colorado law requires both ACA plans and short-term plans to cover preventive care, however short-term plans may not cover certain preventive procedures at 100%.|
|Limit the number of factors to vary insurance premiums||YES||NO||While ACA plans can only vary premiums based on geography, age, tobacco use and number of people covered (single vs. family plan), short-term plans can vary rates due to any number of factors, including health conditions.|
* An insurance plan providing essential health benefits, has established limits on cost-sharing (deductibles, co-payments and out-of-pocket maximums), and meets other requirements to be considered minimum essential coverage.
How short-term plans might cost you more
“People understand that there are some differences in health insurance plans, but for the most part, they think the differences are minor, and that all plans have similar requirements and cover pretty much the same things, ” said Dayle Axman, Director of the Life & Health section of Consumer Services in the Division. “While plans that conform to ACA requirements are more similar, things that sit outside of those requirements, such as short-term plans, are a world apart. Consumers need to know that if they are considering such limited coverage.”
Short-term plans can discriminate against applicants because of their health history, meaning that for people with pre-existing conditions, the companies can completely deny coverage, or exclude services related to that condition. You or your family member’s asthma, diabetes, high blood pressure or allergies may not be covered. Even pregnancy would be considered a pre-existing condition. Because these plans are not required to meet the minimum essential coverage requirements under the ACA, they also don’t have to cover many routine services such as in-patient stays, outpatient surgery and prescription drugs.
While the new federal rules allow such plans to last up to 12 months, and be renewed for a maximum period of 36 months, Colorado law only allows short-term plans to last up to six months. And although consumers can buy another plan when the first one ends (as long as the total coverage time doesn’t exceed 12 months), it is important to understand that the second plan will be a new plan, not a renewal of the first plan. Medical conditions that were covered by the first plan will likely be considered pre-existing conditions under the second plan and may not be covered.
Short-term plans often have limits on benefits. So, if you have a serious illness or accident, you could hit that limit very soon and be stuck with the lion’s share of some very large bills. Even if you’re healthy, an accident that lands you in the hospital will quickly burn through a hospital limit of a few thousand dollars. In considering a short-term plan, you have to think about whether or not you can afford those costs.
Weighing your options
"Short-term plans can be problematic for consumers,” said Debra Judy, Policy Director at the Colorado Consumer Health Initiative (CCHI). “The lack of coverage for pre-existing conditions, the annual and lifetime limits, the benefit exclusions - these are all factors that will leave consumers exposed to high medical bills. Any consumer considering a short-term plan should be aware of the severe limitations of such coverage."
Are there times when a short-term plan could work? Yes, when you need minimum coverage for a short period of time and you have no other health insurance options. Added Commissioner Conway, “Even when short-term plans might be a reasonable option, you have to be prepared to pay for most of your medical costs because of the skimpy coverage they offer.”
Before buying a short-term plan, you should carefully consider the health services and insurance benefits you need. See how those needs fit with other types of health insurance as well as short-term plans. Remember, cost considerations should go beyond monthly premiums. Ask yourself these questions. Can you afford the higher monthly premiums of more traditional health insurance? Can you afford the high out-of-pocket costs beyond the monthly premium of a short-term plan? Put another way, will those low monthly premiums cost you more in the end?
If health insurance is important to you and your family - you have an existing health condition, you have small children, you are, or are considering becoming, pregnant, you take prescriptions to treat a condition like diabetes, high blood pressure or asthma, or you just have an active lifestyle - this is an important decision. Low monthly premiums for short-term plans may look good, but with their limited coverage you could get stuck with high medical bills that definitely won’t save you any money.
The DOI can help
While the Division of Insurance can’t tell you which health insurance plan is right for you, we can help guide you through the questions to ask in making your choices, as well as helping you to understand the terminology, concepts and processes. Our dedicated Consumer Services team helps people untangle the complex world of insurance, as well as investigating formal complaints about insurance companies or insurance agents. Contact us at 303-894-7490 / 1-800-930-3745 (outside of the Denver metro area) / DORA_insurance@state.co.us, or for more information, visit AskDORA.colorado.gov and click the “health insurance” tab.
The Colorado Division of Insurance (DOI), part of the Department of Regulatory Agencies (DORA) regulates the insurance industry and assists consumers and other stakeholders with insurance issues. Visit dora.colorado.gov/insurance for more information or call 303-894-7499 / toll free 800-930-3745.
DORA is dedicated to preserving the integrity of the marketplace and is committed to promoting a fair and competitive business environment in Colorado. Consumer protection is our mission. Visit dora.colorado.gov for more information or call 303-894-7855 / toll free 1-800-886-7675.