Trump is pushing short-term health insurance. How does it work?

Trump is pushing short-term health insurance. How does it work?

Updated Sept. 14, 2018: Short-term health insurance plans are an option for people who haven't been able to get coverage through their jobs or the individual marketplace. You can apply for them at any time and they usually cost less than traditional health insurance.

Under the Obama administration, short-term health plans lasted only three months. But earlier this year, the Trump administration announced consumers will be able to buy short-term plans lasting up to a year, then extend coverage two more years on top of that.

Officials say the change will give Americans more choices.

“In a market that is experiencing double-digit rate increases, allowing short-term, limited-duration insurance to cover longer periods gives Americans options and could be the difference between someone getting coverage or going without coverage at all," said Seema Verma, administrator of the Centers for Medicare & Medicaid Services, when the change to our current health care law was proposed.

What is short-term health insurance?

Short-term health insurance is meant to provide temporary coverage for people transitioning between traditional health policies, perhaps because they're changing jobs. Short-term plans are usually accepted at more doctors' offices and hospitals compared with traditional insurance plans, which are often limited to narrow networks. And they are usually cheaper.

Short-term insurance plans cost an average of 25% less than bronze plans on the individual marketplace, or $65 less per month, according to data from AgileHealthInsurance, a short-term health insurance marketplace and PG partner.

But there is a reason the price is low. Unlike plans on the federal marketplace, short-term insurance doesn't have to cover "essential health benefits" like pregnancy care, mental health treatment or pre-existing conditions. So while you may pay less for a short-term health plan, you're also likely getting less coverage. You should know if this is the case: The new rule requires application materials and contracts for short-term plans to notify buyers that the plans don't meet the same requirements as traditional health insurance. (Agile can help you compare short-term health insurance plans across companies here.)

What happens next?

Short-term health insurance covered 148,118 people in 2015, according to the National Association of Insurance Commissioners. The Trump administration projects another 100,000 to 200,000 will buy short-term plans in 2019 because of its new rule. That's 100,000 to 200,000 fewer people in the individual marketplace.

Because these short-term plans don't cover people with pre-existing conditions, they will likely draw healthier people away from the individual marketplaces. As a result, "Obamacare" insurers will have to cover a sicker population of people. They will likely raise premiums and limit options in response.

About 8.8 million people signed up for a 2018 health insurance plan through last fall. The rule proposed Tuesday is one of a series of moves aimed at dismantling Obamacare. The administration cut the advertising budget and the signup period for the marketplace while ending payments to insurers who give low-income Americans discounts for health insurance payments last year. Trump is also expanding access to association health plans. A proposed rule would allow businesses to buy health insurance that, like short-term plans, would not be subject to Obamacare minimum coverage standards.

In December, Republicans ended the individual mandate requiring taxpayers to buy health insurance or pay a tax penalty. The uncertainty caused by the changes led to higher premiums for marketplace plans.

If it works as it's supposed to, the proposed rule could hike premiums further. The administration is taking comments until April 23 at 5 p.m.

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