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The federal government recently issued a final rule on the expansion of short-term, limited duration health plans.

These plans are meant to serve as a temporary alternative for a consumer with a gap in coverage. They were previously strictly limited to discourage consumers from choosing a short-term plan for major medical coverage because these types of plans do not offer comprehensive coverage.

This final rule relaxes those limits and may lead consumers to consider a short-term plan as a low-cost alternative to ACA coverage. 

However, it's important to know that short-term plans are not an alternative to major medical coverage and should not be presented as such. They do not have to meet the minimum requirements for comprehensive coverage under the ACA. They can exclude preexisting conditions and deny coverage to an applicant due to a preexisting condition. They are not required to cover essential health benefits, prescription drugs, preventive services or substance use disorder treatment. They also can set lifetime and annual dollar limits to the amount they pay.

Additionally, consumers who purchase these plans this year could still face a tax penalty, since the individual mandate repeal does not take effect until 2019.

Short-term plans, though seemingly affordable with potentially lower premiums, may become costly because of the trade-off for benefit coverage and provider access. One stroke survivor, for example, informed the Insurance Department that her short-term, limited-duration coverage had a maximum payout of $40,000, but the costs for emergency and immediate follow-up care for her stroke totaled over $250,000.

Additionally, some insurance agents or insurer websites may try to market short-term policies as comparable to ACA plans. In the past two years, the Insurance Department revoked eight licenses because of deceptive marketing of these plans.

The Insurance Department urges consumers to take caution when examining short-term plans and to contact us if they were led to believe that their short-term policy met ACA comprehensive coverage requirements by calling our Consumer Hotline at 1-877-881-6388 or filling out our online form (select "Consumer Complaints" from the drop-down menu).

The Insurance Department has created a brochure for consumers, Thinking about buying a short-term health insurance plan?