Consumers Need Easier Access to Short-Term Medical

Early press reports suggest that President Donald Trump's upcoming executive order on ObamaCare flexibility will include a provision easing restrictions on the sale of short-term medical insurance.

If that's true, the Trump executive order will be a big help for consumers who legitimately want to buy coverage for a set period of time.

A federal regulation adopted toward the end of the Obama era requires now consumers who use short-term medical policies to buy new policies, with new deductibles, every 90 days. That change hurt consumers, and it did nothing to stabilize the individual major medical market or the Affordable Care Act public exchange system.

But, remember, even though the president has signaled his intent to change regulation, and may issue an executive order that appears to change the regulation, the change is unlikely to happen immediately. The wheels of the federal bureaucracy are not as nimble as Trump tweets or Trump proclamations.

But, if the executive order or another administration move eases short-term medical sales restrictions, that would be good news, and it should start to help consumers who will need health coverage for 2018.

There is a great niche market for short term medical, in part because of the following three reasons:

1. Life changes

The product fits consumers who are between jobs, contemplating an early retirement, or turning 27 and coming off a parent's plan. And — increasingly — the product also fits consumers who earn too much to qualify for subsidies but too little to afford even a high-deductible, bronze-level Affordable Care Act plan.

2. Affordability issues

A consumer who buys a short-term medical plan may be subject to a tax penalty for not having what the government classifies as minimum essential coverage. However, there are many exceptions to the Affordable Care Act individual coverage ownership mandate, including one for consumers who would have to spend more than 8.13% of their income to buy the lowest-cost Affordable Care Act plan available.

Serious people (Photo: Thinkstock)

(Photo: Thinkstock)

Because Affordable Care Act plan costs have jumped dramatically, especially for consumers who do not qualify for federal premium subsidies, and household income has not jumped dramatically, there may be several million people who are now newly exempt from the mandate.

3. Rapid market change

Given all the uncertainty about health care reform — whether ObamaCare stays or goes — it's natural for consumers to want to 'punt' making a decision about their year-round health insurance until some future date.

Because of those considerations, a federal effort to loosen short-term medical insurance rules would be good news for consumers.

Many believe the Trump executive order will also expand access to health reimbursement accounts (HRA), to make it easier for employers to reimburse medical and insurance costs for employees. This will create more flexibility for small employers.

And, finally, the Trump administration will create a pathway for association health plans. This could be a great opportunity for employers, and, potentially, the self-employed to ban together as a 'large group.' But few details have emerged about how these plans would work, and when or how an AHP program would be implemented.

What should advisors do?

Study the final language of the Trump administration executive order carefully to know when it will take effect, and how it will help (or harm) your clients.

Make sure your clients don't jump to any false conclusions, or be led astray by partially-correct information in the general media.

These new rules may still require review by federal agencies, and they are unlikely to take effect immediately.

—-Read Trump Near Signing Order Allowing Interstate Health Insurance Saleson ThinkAdvisor.

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