The uncertain future of short term medical insurance

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August 13, 2014 by Tony Novak

Yesterday I received a telephone call asking about the legal status of short term medical (STM) insurance under the Affordable Care Act and I replied to the barrage of questions mostly by saying that I did not know much on the topic. The fact is that there has been little official comment or guidance about STM since passage of ACA in 2010. I presume that the drafters of ACA simply presumed that STM would become irrelevant once guaranteed issue regular major medical insurance became available. But that hasn’t happened. The consumer need and market demand for short term medical insurance has actually increased here at Freedom Benefits since the opening of the ACA insurance exchanges.

I referred the caller to a friend whose firm works more closely on the development of future insurance products. The friend called me later to say that he felt like the questions were an interrogation and he, like me, had no clear answers.

Here is what we do know about the status of short term medical insurance today:

1. It is available to most – but not all – U.S. residents. The coverage cannot be purchased in six states that disallow it. STM is also not available to individuals with severe or chronic medical conditions.

2. Availability is controlled by location of residence at the time of purchase, not permanent legal residence. This is important because STM is often used for transient coverage within the U.S.

3. STM is mostly exempt from most of the ACA insurance reform provisions. Today’s STM policies are almost indistinguishable, from a consumer’s perspective, to those offered before implementation of ACA.

4. STM is not an ‘exempted insurance’ or a ‘limited benefit insurance’ under the definition provided by ACA.

5. STM is not a ‘qualified health plan’ under the definition provided by ACA.

6. State laws on STM product details vary and this was splintered legal control was unaffected by implementation of ACA. Federal proposals to allow the purchase of this insurance across state lines (and thereby do away with the impact of state legal variations) is still under consideration.

7. STM is not addressed in recent proposed rules introduced by the Centers for Medicaid and Medicare (CMS), the federal agency charged with rule-making for the implementation of the Affordable Care.

8. STM does not enter into the decision of whether an individual is subject to the shared responsibility penalty, where applicable.

9. A handful of companies continue to offer STM and we think that some are better than  others. Freedom Benefits lists the ones we prefer in each state.

10. More details about STM are included in my article at http://tonynovak.com/article/ten-things-you-should-know-about-short-term-medical-insurance.htm

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