Editor’s note: Short-term limited duration plans are health insurance plans for healthy people and resemble policies that used to be offered before Obamacare. The plans are a low-cost way to cover high-cost but unlikely health events, like a catastrophic accident. The Trump Administration removed restrictions on the plans and except for several states where they are banned, the policies can last from three to 12 months before deductibles reset and can be renewable for the same premium for up to 3 years. Below are ten reasons why short term plans make sense. See related article, Court Upholds Short-Term Plans Despite Attacks
- Short-term plans have a long history.
- Short-term plans can last up to 12 months and are designed as bridge insurance:from home to school, from school to work and from job to job.
- Far from being junk insurance, short-term plans have served a niche market and have done so without serious complaint for decades.
- Obamacare regulations do not apply, including the prohibition on basing enrollment and premiums on the applicant’s health condition. Most state regulations don’t apply either.
- Short-term plans are designed for the healthy. They typically do not cover mental health or alcohol and drug abuse and often do not cover prescription drugs.
- President Barack Obama feared these plans would attract enrollees away from the Obamacare exchanges. So, by executive order (without any act of Congress), Obama limited them to three months, with no renewal.
- President Donald Trump, likewise by executive order, reversed the Obama order and allowed renewals for up to three years.
- Trump also allows a second type of insurance to bridge the gap between three-year periods. By stringing these two types of insurance together, the Trump ruling allows short-term insurance to be renewable indefinitely.
- This means states can allow insurance that looks very much like pre-Obamacare insurance.
- The fact that there is very little state regulation on short-term plans creates the possibility for the closest thing we have ever seen to free-market health insurance.
John Goodman (johngoodman@goodmaninstitute.org) is co-publisher of Health Care News. This article is excerpted from an article in Forbes on June 29, 2020. Reprinted with permission.
