can impose lifetime and annual limits – for example, many policies cap covered benefits at $2 million or less (Table 1).do not have to cover essential health benefits – typical short-term policies do not cover maternity care, prescription drugs, mental health care, preventive care, and other essential benefits, and may limit coverage in other ways (Table 2).exclude coverage for pre-existing conditions – policyholders who get sick may be investigated by the insurer to determine whether the newly-diagnosed condition could be considered pre-existing and so excluded from coverage 4.are often medically underwritten – applicants with health conditions can be turned down or charged higher premiums, without limit, based on health status, gender, age, and other factors.The Affordable Care Act (ACA) exempted short-term policies from market rules that apply to most major medical health insurance policies sold to individuals in the non-group market: rules that prohibit medical underwriting, pre-existing condition exclusions, and lifetime and annual limits, and that require minimum coverage standards. As a result, an individual who buys a short-term policy and then becomes seriously ill will not be able to renew coverage when the policy ends. To continue coverage beyond that date requires applying for a new policy. Whereas federal law since 1996 2 has required all other individual health insurance to be guaranteed renewable at the policyholder’s option, coverage under a short-term policy terminates at the end of the contract term. BackgroundĪs the name suggests, short-term health insurance policies are not renewable. This brief provides background information on short-term policies and how they differ from ACA-compliant health plans. In addition, late last year, President Trump issued an executive order directing the Secretary of Health and Human Services to take steps to expand the availability of short-term health insurance policies, and a proposed regulation to increase the maximum coverage term under such policies was published in February. It is possible this change could lead more consumers to consider purchasing short-term policies. Starting in 2019, the tax penalty will be reduced to $0. Late last year, Congress repealed the Affordable Care Act’s individual mandate penalty, the requirement that individuals have minimum essential health coverage or face a tax penalty. Short-term policies are also characterized by other significant limitations, including the types of services covered, often with a dollar maximum. 1 Unlike other products that are considered “limited benefit” or “excepted benefit” policies – such as cancer-only policies or hospital indemnity policies that pay a fixed dollar benefit per inpatient stay – short-term policies are generally considered to be “major medical” coverage however, short-term policies are distinguished from other comprehensive major medical policies because they only provide coverage for a limited term, typically less than 365 days. The product was designed for people who experience a temporary gap in health coverage. Short-term, limited duration (STLD) health insurance has long been offered to individuals through the non-group market and through associations. NOTE: An updated explainer for consumers considering short-term plans during marketplace open enrollment is now available.
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