Governor Brown signed SB 910 that effectively kills short term health plans for individuals and families in California. SB 910 authored by Senator Hernandez bans short term medical plans in 2019. The lack of any alternatives for gap health insurance means that countless families will be put at risk for exorbitant health care services and bankruptcy triggering medical bills.
Short term medical plans are meant to bridge the gap between when an individual or family loses coverage and the start of their new health insurance policy. The gap in coverage maybe as short as one month. In 2019 individuals and families may have no alternatives other than being not insured during this gap period.
California Bans Short Term Health Insurance
Short term medical plans are not perfect. They usually don’t cover pre-existing conditions, have limited prescription drug coverage, and impose a cap on the maximum pay out of claims on the member’s behalf. In addition, they were only for 90 days. They were never meant to be a substitute for comprehensive health insurance. However, they are a nice backstop to emergency room visits brought on by an accident or sudden illness.
The Trump administration released new regulations that allow for short term medical plans to be issued for longer periods than 90 days, potentially for a full 12 months. The fear is that families would sign up for less expensive short term medical insurance in lieu of the comprehensive medical plans for individuals and families offered directly by the health insurance companies and through Covered California.
SEC. 4. Section 10123.61 is added to the Insurance Code, to read:
10123.61. (a) Commencing January 1, 2019, a health insurer shall not issue, amend, sell, renew, or offer a policy of short-term limited duration health insurance in this state.
(b) For purposes of this section, “short-term limited duration health insurance” means health insurance coverage provided pursuant to a health insurance policy that has an expiration date specified in the policy that is less than 12 months after the original effective date of the coverage.
In California, the short term medical plans were not that less expensive than comprehensive health insurance that does not preclude pre-existing conditions and have no maximum dollar amount cap on benefits. Except for that very short period in between jobs and employer sponsored health insurance, it does not make financial sense to have a short term medical plan in California for a full year because the benefits are so poor compared to the comprehensive health insurance.
Special Enrollment Period
When an individual or family loses health insurance coverage for most reasons other than non-payment of premiums, they have a 60 day window to enroll a new health plan. This 60 day window is known as the Special Enrollment Period (SEP). If you go one day past the window, no health plan or Covered California will sell you a health insurance policy.
While the process of enrolling in a health plan during SEP is straight forward, it can be hassle that many people would rather ignore considering they have other insurance ready to start. One hurdle is providing evidence that you actually qualify for a SEP. This may mean showing that you just moved into California, a letter that your prior health insurance coverage is terminating, or you are losing coverage because of a divorce.
Many people just don’t want these headaches and are fearful of going through Covered California. If you don’t fill out the Covered California application properly, the whole family could be put into Medi-Cal, which presents problems of its own in terms of extricating the household out of the system. And if there is no need for all the benefits of a comprehensive health plan for just a short period, the short term medical plans offered a simple solution to bridge the coverage gap.
I have no problem with legislators and the governor pushing back on really stupid Trump administration policies to undermine the Affordable Care Act. However, they have offered no solutions to help people bridge the coverage gap. They have not offered any consumer insurance products to help families transition from one comprehensive medical plan to another. The politicians are making this huge assumption that everyone has staff and aides to manager their calendars and not miss any enrollment deadlines.
The truth is that even the most organized individual can forget about their SEP window. I know because they call me for short term medical plans. Sometimes life is overwhelming between moving, kids, daycare, school, you name it. All of the sudden a person wakes up and realizes they forgot to enroll in a health plan and find they can’t because they are outside their 60 day SEP window.
Families Exposed To Bankruptcy With No Short Term Medical Insurance
Then there are high functioning people who have mental health challenges or just forgetful. I have talked to people who worked through a period of depression after the loss of a job only to find they can’t get health insurance. At least I could offer the less-than-perfect short term medical plans until the next job or open enrollment for the individual and family plans.
These politicians just don’t understand how complicated the enrollment process is with the enrollment period dates, qualifying life events, and supplying documentation. And why would they understand, they have great government health insurance for them and their families.
I completely understand how people have tried to manipulate the SEP because they voluntarily decided not to enroll in health insurance. I’ve had several calls from people who suddenly found themselves ill with no health insurance. The SEP process, with the bona fide qualifying life events, is meant to stop adverse selection. People, who only enroll in health insurance to get expensive surgery or treatment, and then drop the health plan, push up the rates for the rest of us.
By banning all short term medical plans, California is punishing people who are not out to manipulate the system for their own benefit. All they wanted was a little assurance that if something really nasty happened, they wouldn’t have to declare bankruptcy. Now these families, who just forgot about the enrollment deadlines, will be subject to the wolves of the health care field.
Where Are The Alternatives To Short Term Medical Plans?
There is no reason that Senator Hernandez or other legislators could not have worked with the health insurers to develop an alternative. A health plan is not junk just because it doesn’t include all the no cost preventive health care visits of ACA plans, has a very restricted network of providers, or thin drug formulary. All people want is a little coverage until the open enrollment period opens and they can enroll in a comprehensive plan. Short term medical plans could be sold through Covered California so they could keep track of people and make sure they didn’t become habitual users of short term plans.
In case you are wondering, I am a licensed health insurance agent who sells short term medical plans. Less than 1% of my revenue comes from such enrollments. I view short term medical plans similar to other offerings such as dental, vision, and travel insurance. Short term medical plans are just one of the consumer products I offer, or rather, did offer. They were more of an ancillary support product as opposed to the important health insurance plans for individuals, families, small groups, and Medicare plans I offer.
The banning of all short term medical plans without any alternative or process is bad public policy. It is a short-sight measure meant more to spite the Trump Administration than it is to craft a health insurance market place with products that help families stay covered.