Short Term Policies No ACA Panacea

An insurance product that many thought would become extinct with implementation of the ACA can’t be counted out – yet. Short term health insurance policies have been an attractive short-term option for many years. While the policies generally offer limited benefits, the ability to purchase a plan for 30 days or 6 months or even 360 days has had an appeal for people who needed to bridge an insurance gap.

While these policies are attractively priced, they may come with an unexpected cost. Short-term medical plans are limited coverage and, as such, the coverage does not count as MEC (minimum essential coverage) for ACA purposes. So, despite having health coverage, an enrollee in a short-term plan will still be subject to the individual responsibility penalty. And, with the penalty for 2016 now at $695 or 2.5% of household income above the filing threshold, the short-term plan may not be the bargain a consumer planned for.

What are some of the distinctions between short-term plans and ACA compliant plans?

Short-Term Plan                ACA Compliant Plan

No                                                Yes                          Coverage for pre-existing conditions

No                                                Yes                          Preventive care without cost sharing

Yes                                                No                           Enrollment at any time

No                                                 Yes                          Guaranteed renewable

Yes                                                 Yes                          Sold by respected health insurers

Brokers who sell this line of coverage apprise their consumers of the limitations on these policies, especially the possibility of incurring the individual tax penalty. These limited policies may be an option to consider when someone has missed the ACA open enrollment period or has some other temporary need. But, it’s important that consumers understand the limitations and the consequences of this insurance product.

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