Short-term health insurance plans offer benefits, drawbacks for Hoosiers
INDIANAPOLIS (WISH) – As thousands of Indiana families look to buy health insurance for the next year and consider changes in plans, the Indiana Department of Insurance issued a warning to Hoosiers in the market for short-term insurance programs.
For college students coming off their parent’s health care plan, or healthy people under 65 that are in between jobs, a short-term or limited-duration health care plan may suit their financial goal.
“These (plans) kind of came about because the open enrollment period for the Affordable Care Act is only once a year. So if you need coverage until you can get the Affordable Care Act, then you would sign up for one of these to cover you for six months or so, and then the idea is you would go on to the Affordable Care Act,” said Kyle Anderson, a clinical assistant professor of business economics at Indiana University.
Many of the short-term health care plans in Indiana have low monthly premiums, some under $200 a month, but there is a catch. Deductibles are high, sometimes $12,000 before coverage kicks in.
“You are kind of getting what you pay for, because if something were to go wrong with you, it would be very expensive for the insurance company,” Anderson said. “So you are paying, you are getting a bare bones policy and you are paying a pretty small amount. I mean, $175 is not very much in the health insurance market. The problem is consumers are not always aware of what they are getting and how little they are getting when they purchase one of these polices.”
Traditional employer-based health care plans or plans available through the Affordable Care Act are required to cover ten essential health benefits, like vaccinations, prescription drugs, and routine doctors’ visits. However, short-term plans are exempt from those regulations.
In Indiana, short-term health care plans are only required to cover four of the ten essential health benefits: hospitalization, ambulatory patients, emergency services and lab services.
“Short-term insurance will not cover maternity costs, it will not cover preexisting conditions, it will not cover regular prescriptions, medicine,” Dr. Matt Will, associate professor of finance at the University of Indianapolis said. “What it does is cover whenever there is a major item that occurs in your life, and it will cover very comprehensively all of the expenses attached to that, but only when you have a major loss.”
Mental health and substance abuse services, rehabilitative services and devices are not covered. If you are diagnosed with cancer or any chronic illness, there is a good chance the insurance company will not renew your policy.
When the Affordable Care Act was first introduced, these short-term plans were illegal because the thought was that they kept people away from the government health care plans.
“Until this came into play, we had a lot of people that were simply uninsured, especially young folk because now that it is not a requirement by law that you buy insurance, people are going uninsured,” Will said. “Well, this is a much lower-cost alternative. It is going to cover you for those major expenses when they kick in, so you are not going to go broke or bankrupt.”
The Indiana Department of Insurance allows companies to retroactively cancel plans, meaning the insurance companies can go back through your medical history. If they find something, the policy can be canceled, and coverage denied.
Experts suggest that if you are considering a short-term plan, be sure to ask questions.