Short-Term Health Insurance Plans Are an Especially Risky Option During the Coronavirus Pandemic

A recent analysis from The Commonwealth Fund highlights the problems consumers with “short-term” health plans may face during the coronavirus emergency.

Over the past few years, the Trump administration has expanded access to short-term health plans that are not required to adhere to the Affordable Care Act’s (ACA) consumer protections or insurance regulations. This non-compliance allows short-term plans to charge premiums based on health status, decline coverage for pre-existing conditions, impose annual or lifetime limits, and exclude coverage for the essential health benefits. Because they can offer skimpy benefit packages and deny coverage for serious medical needs, short-term plans typically have lower premiums than ACA-compliant plans. Though they may look like a good value, short-term plans can expose enrollees to unlimited out-of-pocket costs if they get sick or injured.

Amid the coronavirus pandemic, these risks are only growing. Enrollees who need coronavirus-related care may soon discover they lack adequate coverage. While new federal guidance requires most private health insurers to pay for coronavirus testing and related services, this requirement does not extend to short-term plans.

Recent coronavirus relief legislation provides a partial backstop. It allows states to use Medicaid to cover coronavirus testing, but not treatment, for uninsured residents. Notably, the law defines the uninsured to include people with short-term plans—underscoring just how limited this coverage is. Despite this, the Trump administration is not allowing these enrollees to switch to ACA-compliant plans. Nor is it reimbursing providers for enrollees’ care, as it is for other uninsured Americans.

Such a federal response is unlikely to ensure access to coronavirus care for people with short-term plans. The Commonwealth Fund’s new report examines the scope of this looming problem, identifying several barriers short-term plan enrollees may face during the outbreak. Unsurprisingly, the report finds that compared to people with ACA-compliant plans, short-term plan enrollees are more likely to experience coverage gaps, service denials, and high out-of-pocket costs when seeking treatment.

These inadequacies carry significant consequences for the 87,000 people who are estimated to be in short-term plans. Should they need coronavirus-related treatment—which their plans are unlikely to cover—they could face steep costs, from $10,000 to $90,000. Enrollees whose plans offer some coverage could still be on the hook for more than $30,000.

Troublingly, consumers may not fully understand these pitfalls at the time of enrollment due to deceptive marketing. Since these practices are continuing during the pandemic, an ever-growing number of Americans could find themselves with substandard coverage.

Medicare Rights has long been concerned about short-term plans, especially because many people could sign up without understanding the hazards. The Commonwealth Fund’s review shows this coverage and confusion could be especially problematic for people who need care due to and during the coronavirus emergency.

In the absence of federal government action to address these pitfalls, several states have taken the lead. We support these efforts to date—including those to allow residents to purchase ACA-compliant coverage—and urge additional reforms. For example, states have broad authority to regulate short-term plans. They could prohibit the sale of such policies during the crisis, curtail deceptive marketing tactics, and require the plans to cover testing and treatment without cost-sharing.

Importantly, the dangers associated with being un- or under-insured during the coronavirus emergency require immediate policymaker action. This is not limited to those with short-term plans; people who are eligible for but not currently enrolled in Medicare are also at risk. We strongly urge Congress to adopt the Medicare enrollment pathway outlined in the HEROES Act, which was recently passed in the House. This commonsense policy is urgently needed to help people quickly connect with their coverage during this unprecedented crisis.

Read The Commonwealth Fund analysis, “In the Age of COVID-19, Short-Term Plans Fall Short for Consumers.”