Thursday, November 1, 2018
Understanding Short Term Health Plans
We provided a little introduction to short term health plans in our last post but we wanted to dive a little deeper. If I reference specific language from a plan it’s likely from the short term plans we are considering from United Healthcare. We’ve researched these plans because they are accepted by our current healthcare provider, which is obviously a critical point based on our experience this year. However, providers, and even different plans within the same provider, have varying rules and coverages. Here are some of the key we've learned about short term plans:
The first thing you should know, and one of the elements that make these plans much cheaper, is that they do not cover pre-existing conditions. It may seem obvious but to be clear here’s the definition of a pre-existing condition per the plans we are reviewing:
“A condition: (1) for which medical advice, diagnosis, care, or treatment was recommended or received within the 24 months immediately preceding the date the covered person became insured under the policy/certificate; or (2) that had manifested itself in such a manner that would have caused an ordinarily prudent person to seek medical advice, diagnosis, care, or treatment within the 12 months immediately preceding the date the covered person became insured under the policy/certificate.”
Those individuals or families with a costly pre-existing condition needing coverage can immediately skip short term health plans. If you are pregnant at the time of plan initiation this is also considered a pre-existing condition so this isn’t the right plan for you if pregnant! However, if you are reading this it means you are considering Liberty, which also excludes coverage for pre-existing conditions (at least to start).
Another key difference that keeps the price of short term health insurance plans down is that there is a maximum benefit that can be provided to each participant. With a traditional ACA approved long-term planned there is no maximum benefit. For example, the United Healthcare offers plans with two different lifetime plan maximums - $600,000 or $2,000,000. This means that with a short term plan, if you have medical costs that exceed $2,000,000, you will be on your own for those costs. There are certainly situations where costs could exceed that benefit. It’s a risk that needs to be weighed just like any other. These maximums are “per individual” so in theory each individual in your family could hit that maximum.
Most of the plans we have reviewed from United Healthcare include prescription drug coverage, however, there are certainly options of the plans that do not. Under the plans we’ve been most interested in from United Healthcare you pay for your prescriptions up front with a discount card they provide (or you get a better deal from GoodRx as we’ve mentioned in past posts) and then submit the expense to United Healthcare. This cost would go against your deductible then would be eligible for reimbursement after the deductible is hit (subject to any co-insurance just as you may have in a traditional plan).
Deductibles and Out of Pocket Maximums
Deductibles for the short term plans operate pretty similarly to traditional insurance plans, however, for the plans we’ve reviewed, there is no family deductible. A number of the long term ACA plans would include an individual deductible, say $2,500, then a family deductible of $10,500 for example. Thus, if you have a family of 5 like us, one person in your family could have $10,500 in charges and, even if someone hadn’t hit their individual deductible, all future charges would be covered (or subject to co-insurance). This is because the family deductible of $10,500 would have been met. The short term insurance plans we’ve reviewed have only individual deductibles. In the scenario just described, each individual’s deductible would still apply, even if one individual had significantly exceeded their deductible. There are, however, out of pocket maximums for families when co-insurance is used just like in a traditional plan. If you have no co-insurance your out of pocket maximum would be your deductible amount times the number of people in your family. For example, if we chose a short term plan from United Healthcare with a $5,000 individual deductible, and 0% co-insurance, our out of pocket maximum would be $25,000 (plus any medical costs over the $2M maximum benefit per person). If you choose a plan with co-insurance you are able to select the out of pocket maximum for co-insurance you are comfortable with.
Length of Plans
The length for short term health insurance plans varies by state. In Ohio these plans can be offered for 360 days. This makes it feasible to utilize short term plans for coverage. Previously these plans expired every 30-90 days which made it inefficient to use (expiring, then renewing, etc.). In some states short term plans may not even be an option (California, Massachusetts, New York and New Jersey look like they’ve effectively banned them). Thus, it’s important to review the allowed length of the plan in your state.
What Else isn’t Covered?
We have to admit, there are two pages of items that aren’t covered as part of short term plans and I can understand how someone wouldn’t read it all. That said, it’s important you have full knowledge and understanding of this before choosing a plan.
Below are some of the key items we’ve seen highlighted as not covered in the short term plans we’ve reviewed (beyond what we’ve already mentioned). Please, please, please do your own research because exclusions vary by insurance provider and plan!
For hospital room and board and nursing services if admitted on a Friday or Saturday, unless for an emergency, or for medically necessary surgery that is scheduled for the next day.
For injuries sustained during or due to participating, instructing, demonstrating, guiding, or accompanying others in any of the following: sports (professional, or semi-professional, or intercollegiate except for intramural), parachute jumping, hang-gliding, racing or speed testing any motorized vehicle or conveyance, scuba/skin diving (when diving 60 or more feet in depth), skydiving, bungee jumping, or rodeo sports.
I called about this one. We are a sports family but we don’t do the more extreme sports. I was assured the point of this exclusion was that you aren’t covered for injuries from professional, semi-professional or collegiate sports. It did not mean if my kids get hurt playing baseball or basketball they are not covered.
For injuries sustained during or due to participating, instructing, demonstrating, guiding, or accompanying others in any of the following if the covered person is paid to participate or to instruct: operating or riding on a motorcycle, racing or speed testing any non-motorized vehicle or conveyance, horseback riding, rock or mountain climbing, or skiing.
Sorry risk takers or wealthy equestrians!
For non-emergency treatment of tonsils, adenoids, hemorrhoids or hernia.
Non-emergency treatment isn't allowed so do I just make sure it’s an emergency? Wouldn’t trust it for these to be covered.
Resulting from intoxication, as defined by state law where the illness or injury occurred, or while under the influence of illegal narcotics or controlled substances, unless administered or prescribed by a doctor.
Don’t do anything stupid when under the influence. A good rule regardless of your health insurance options.
For treatment of mental disorders or substance abuse including court-ordered treatment for programs, except as provided in the policy/certificate.
This has been a highly publicized exclusion.
Due to pregnancy (except complications), except as provided in the policy/certificate.
I don’t know what “except as provided in the policy/certificate” means but I’d be wary if planning a pregnancy.
So Who are these Plans Right For?
Clearly these plans make most sense for younger, healthy individuals and families. If you are a healthy 26-year-old freelancer, who doesn’t have a subsidy for an ACA plan, this option will look great. Likewise, if you have already been considering Liberty, which has its own set of exclusions, and are blessed with relatively good health you might also consider these plans.
We understand the concern that the availability of these plans may cause the younger and healthy to exit the ACA disrupting the market (making it far more expensive for individuals with serious pre-existing conditions to buy insurance – a bad thing!). However, since roughly 80% of individuals/families buying insurance on the ACA exchange receive subsidies there may be little incentive for many to leave the exchange keeping short term insurance a niche product (that could be helpful to many).
Hopefully this overview provides some insight into short term insurance plans. If you are considering Liberty it means you are open minded about your insurance options and weighing risk to cost. Thus, short term insurance could a viable option (especially when coupled with the right level of research!).