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What's The Big Deal About Short-Term Health Plans?

(Photo by Alex Proimos/Flickr Creative Commons)
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California has launched another salvo in its war with President Trump over health care. The state Senate Monday gave final approval to a bill that would kill off a type of medical coverage with a fancy yet oddly redundant name: "short-term limited duration health insurance." The legislation now goes to Governor Brown's desk.


Short-term plans are designed to provide stopgap coverage for a few months. Until now, California has allowed them for six months, with the possibility of being renewed for another six months.

Their main selling point: they're much cheaper than more traditional health insurance. The tradeoff is that they cover a lot less stuff. The Trump administration likes them so much that it's changed the rules to let insurers extend these plans for up to three years.

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Critics call these short-term plans "junk insurance." Why? It goes back to the coverage question.

Pregnant? They don't have to cover prenatal care. Or maternity care. Or mental health care. In fact, they don't have to cover any of the 10 "essential benefits" defined under the Affordable Care Act, which also include drug prescriptions and preventive care.

If you have a pre-existing condition, they may not accept you at all. If they do, they can charge you more -- and don't expect them to cover anything related to your pre-existing condition.

Short-term plans are also exempt from Obamacare's caps on annual and lifetime coverage.

"These substandard plans existed prior to the [Affordable Care Act] before we had minimum standards and when people could be denied for pre-existing conditions and patients needed stopgap solutions," Anthony Wright, executive director of Health Access California, wrote in an email.

"Now Covered California is available year-round for those who just lost employer benefits and need coverage until the new job insurance kicks in, who just moved to a new area, or got married or divorced," he said.


The other reason the legislature wants to do away with short-term plans is to help people in the rest of the health insurance market. Since these plans offer little in the way of coverage, they're bound to attract healthy people who don't have to see the doctor much. If those people leave more robust plans that are required to cover the 10 Obamacare essential benefits, those plans will become more expensive for the sicker people left behind.

If Gov. Brown signs the bill, California will join New York in banning short-term plans. At least three states -- Maryland, Vermont and Hawaii -- are allowing them, but for no more than three months.

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The California Association of Health Underwriters and Anthem Blue Cross oppose the bill. They want more flexibility in what they can offer to consumers. The underwriters association says that without short-term plans, some people will go without health insurance altogether -- and might end up using the ER for basic care.

Kaiser Permanente "strongly supports" the bill, the HMO said in a statement. "Short term coverage is not health insurance and should not be permitted to be sold as such," it said. "It is also detrimental to consumers and will destabilize the individual market in California, leading to premium increases."

America's Health Insurance Plans, a national industry organization, seemingly tried to split the baby after the administration issued its rule expanding the use of short-term plans for up to three years.

"Consumers deserve more choices, particularly those who do not qualify for federal subsidies and must pay the full premium," the group's President/CEO Matt Eyles said in a statement.

But he went on to say: "We remain concerned that consumers who rely on short-term plans for an extended time period will face high medical bills when they need care that isn't covered or exceed their coverage limits."

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