Consumers looking for health insurance will be finding it easier in 2019. Premiums for individual plans are expected to stabilize, and less risk has enticed more providers to reenter the market.
For those who earn too much to qualify for a government subsidy, the cost of getting coverage can be prohibitive. But now short-term healthcare plans are looking like a better option for many Americans.
So What Happened?
Important changes to healthcare legislation are making temporary policies more attractive. In 2017, lawmakers passed the Tax Cut and Jobs Act with an important provision which repealed the most unpopular portion of the Affordable Care Act (ACA).
According to the Congressional Budget Office (CBO), by 2027 the individual marketplace is expected to grow by 10 percent as a result of the repeal. Standard & Poor’s estimated that 3 to 5 million wouldn’t have health insurance by that same year.
The “individual mandate” required that individuals purchase insurance policies that met strict ACA requirements or they’d pay a penalty if they couldn’t qualify for an exemption. This mandate of the healthcare law proved to be controversial and garnered heavy public criticism.
By 2015, more than 19 million Americans were without insurance, having to either claim an exemption or pay the penalty. About 6.5 million paid the fine, with the penalty averaging $470 according to the Internal Revenue Service (IRS).
As it turned out, for many Americans, the fine was significantly less than the cost of coverage through an ACA-compliant plan – and in many areas, only a handful of health plans were available. Many taxpayers complained that if they couldn’t afford to pay for health insurance, imposing a monetary penalty seemed counterproductive.
The purpose of the mandate was to force consumers to enter the marketplace by providing penalties for non-participation. This was promoted as a benefit – a win-win for everyone – so that insurers could offset the risk by participating in healthcare.gov marketplace exchanges.
The government required that health plans have “minimum essential coverage,” a major medical policy with established limits on deductibles, copayments, and out-of-pocket maximum amounts. These plans were robust in coverage and came with premiums to match.
Insurers couldn’t reject enrollees for preexisting conditions. Politicians decided that in order to offset this restriction, many more healthy Americans would have to buy insurance to spread the risk of the very sick over a larger pool.
As consumers fled the exchanges, the cost of the premiums climbed. This meant that those remaining in the pool were much sicker and more expensive to cover.
As a result of increased risk, plan providers in the exchanges increased the premiums to match, and even more healthy individuals left the ACA program. They were looking for an alternative to the expensive major medical plans that were government-mandated.
According to the CBO, premiums for what’s known as “benchmark plans” or the second lowest silver-level plan on the marketplace exchanges are expected to continue to increase 7 percent each year through 2028. The announcement came in October 2017 when the Department of Health and Human Services (HHS) reported that those same premiums would be rising an average of 37 percent for 2018. Yikes!
According to WorldatWork, salaries are expected to remain stagnant despite record unemployment. Salary budgets increased only 3.1 percent in 2018, and 2019 isn’t expected to be much better at 3.2 percent. It looks like healthcare premiums will devour more and more of the family budget.
More Options in 2019
Short-term healthcare plans were initially established as a temporary measure to provide some form of coverage in the event of loss of a job or some other situation that required consumers to wait for more traditional coverage. But there were advantages that made temporary health plans much more attractive.
The ability to customize short-term healthcare plans without all the Obamacare requirements along with significantly lower premiums proved to be an enormous enticement. Up until the repeal of the individual mandate, these policies weren’t ACA-compliant.
Additionally, a new ruling extended the term of these plans up to 364 days, with the ability to renew them to 36 months. It would seem that short-term healthcare plans didn’t have to be so short after all.
However, availability of short-term healthcare plans varies as some states place much tighter restrictions on these policies.
Short-term healthcare plans aren’t without risk, however. Critics point out that the coverage they provide is “skimpier” because they’re not major medical plans—also the reason for the lower cost. And they worry that some Americans won’t understand that temporary plans have limits on benefits as well as restrictions. Further, unlike ACA plans, enrollees can be rejected from short-term plans for preexisting conditions.
Nevertheless, many younger, healthier consumers are flocking to short-term healthcare plans in the hopes of gaining health coverage while avoiding skyrocketing premiums.
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