Alternatives to ACA Plans - Pros and Cons you should know
November 17, 2017
I've seen so many people online searching for alternatives to ACA ("Obamacare") plans. I TOTALLY get why people are looking for less expensive options, as ACA premiums have certainly gone beyond anything I could have dreamed when the law first went into effect in 2014.
But having spent close to 20 years in this business, I've seen enough to know that most people find health insurance plans pretty darned confusing. Then throw in a bunch of "alternatives," and I'm concerned about the potential for very expensive misunderstandings - of people thinking they're fully covered, and they're NOT even close to that.
I think you should be well informed about the health care coverage you're considering before you choose something with such huge potential financial consequences. In this day and age, health care costs can reach a million dollars shockingly quickly. (Which is a post for another day.)
Here are the types of plans I see most frequently being marketed as major medical work-arounds. In the interest of full disclosure, I am suggesting certain of them to my clients as well - but only while advising them of the potential pitfalls.
Indemnity plans. These plans plan pay a flat amount for a variety of types of medical services. For instance, they will pay the policyholder, say, $5000 per day in the hospital, perhaps $2,000 per day for outpatient chemo treatments, etc.
While they are considered insurance plans, do NOT think they will come anywhere close to covering your potential medical bills. Even a "minor" stay in the hospital - meaning no surgery or expensive tests - can easily run $10,000 a day. The same for chemo treatments and all the associated bills that go along with them.
While indemnity plans can serve as an add-on to a major medical plan to help offset out-of-pocket costs, I would NEVER recommend one to my clients as a major medical replacement.
Faith-based coverage. These are not insurance products. Because of the separation of church and state, it was determined that holders of faith-based plans are not subject to the individual mandate - aka the tax penalty.
While faith-based plans are generally offered by well-meaning organizations, just be aware that you have a relatively small pool of people paying fairly small monthly payments. Since the plans are not in any way regulated, I don't know who or what is actually minding the finances to be sure of sufficient reserves. It's very possible a few really large claims could up-end the ship.
If they are unable to pay your bills or have to close down completely, there are no legal protections. Enough said.
Short-term medical (STM) plans. The original (and still the intended) purpose of short-term medicals plans is to provide temporary coverage between major medical plans. The down-sides of short-term plans are that they require underwriting (health questions), and do not cover pre-existing conditions, most preventive care, or maternity.
Because of all these limitations, short-term plans just won't work for a fair number of who either need pre-existing conditions covered or who will be declined for coverage altogether. Also, since they don't meet the requirements of the ACA, they do not protect those covered from the tax penalty.
As of March of 2017, short-term plans were limited to three-month coverage periods. Some carriers are now getting around this by automatically allowing policyholders to re-up after the first 3-month period and are waiving the pre-existing condition clause for any new condition that arise after that first 3-month policy was issued.
Be aware that deductibles and coinsurances do start over with each 3-month re-write - so don't get too carried away with opting for really high deductibles.
I think we are going to see a loosening of the regulations surrounding STM plans under the current administration, so stay tuned for possible future short-term options for longer terms.
Minimum Essential Coverage (MEC) plans. These are primarily (from what I've seen) preventive care plans. The big selling point for them is that, because they offer what the government considers "minimum essential coverage," they apparently protect the insured from the tax penalty.
So what am I advising for my clients? For those who are 1) not eligible for a subsidy, 2) reasonably healthy and 3) unable or unwilling to pay the high premiums of ACA plans? I'm suggesting that a combination of a short-term plan that offers repeat re-writes with a MEC plan offers the best alternative coverage available at the current time.
Is it flawless? Absolutely not. But I'm sharing the potential pitfalls with my clients so they can make an informed decision about how much risk they're willing to take.
Of course, that's as of this moment. Insurers could come out with new options or Washington, DC, could come out with new edicts that could change the landscape. But for now, we have to work with the options we have and the limitations within our current regulations, so that's my game plan for the foreseeable future.
But having spent close to 20 years in this business, I've seen enough to know that most people find health insurance plans pretty darned confusing. Then throw in a bunch of "alternatives," and I'm concerned about the potential for very expensive misunderstandings - of people thinking they're fully covered, and they're NOT even close to that.
I think you should be well informed about the health care coverage you're considering before you choose something with such huge potential financial consequences. In this day and age, health care costs can reach a million dollars shockingly quickly. (Which is a post for another day.)
Here are the types of plans I see most frequently being marketed as major medical work-arounds. In the interest of full disclosure, I am suggesting certain of them to my clients as well - but only while advising them of the potential pitfalls.
Indemnity plans. These plans plan pay a flat amount for a variety of types of medical services. For instance, they will pay the policyholder, say, $5000 per day in the hospital, perhaps $2,000 per day for outpatient chemo treatments, etc.
While they are considered insurance plans, do NOT think they will come anywhere close to covering your potential medical bills. Even a "minor" stay in the hospital - meaning no surgery or expensive tests - can easily run $10,000 a day. The same for chemo treatments and all the associated bills that go along with them.
While indemnity plans can serve as an add-on to a major medical plan to help offset out-of-pocket costs, I would NEVER recommend one to my clients as a major medical replacement.
Faith-based coverage. These are not insurance products. Because of the separation of church and state, it was determined that holders of faith-based plans are not subject to the individual mandate - aka the tax penalty.
While faith-based plans are generally offered by well-meaning organizations, just be aware that you have a relatively small pool of people paying fairly small monthly payments. Since the plans are not in any way regulated, I don't know who or what is actually minding the finances to be sure of sufficient reserves. It's very possible a few really large claims could up-end the ship.
If they are unable to pay your bills or have to close down completely, there are no legal protections. Enough said.
Short-term medical (STM) plans. The original (and still the intended) purpose of short-term medicals plans is to provide temporary coverage between major medical plans. The down-sides of short-term plans are that they require underwriting (health questions), and do not cover pre-existing conditions, most preventive care, or maternity.
Because of all these limitations, short-term plans just won't work for a fair number of who either need pre-existing conditions covered or who will be declined for coverage altogether. Also, since they don't meet the requirements of the ACA, they do not protect those covered from the tax penalty.
As of March of 2017, short-term plans were limited to three-month coverage periods. Some carriers are now getting around this by automatically allowing policyholders to re-up after the first 3-month period and are waiving the pre-existing condition clause for any new condition that arise after that first 3-month policy was issued.
Be aware that deductibles and coinsurances do start over with each 3-month re-write - so don't get too carried away with opting for really high deductibles.
I think we are going to see a loosening of the regulations surrounding STM plans under the current administration, so stay tuned for possible future short-term options for longer terms.
Minimum Essential Coverage (MEC) plans. These are primarily (from what I've seen) preventive care plans. The big selling point for them is that, because they offer what the government considers "minimum essential coverage," they apparently protect the insured from the tax penalty.
So what am I advising for my clients? For those who are 1) not eligible for a subsidy, 2) reasonably healthy and 3) unable or unwilling to pay the high premiums of ACA plans? I'm suggesting that a combination of a short-term plan that offers repeat re-writes with a MEC plan offers the best alternative coverage available at the current time.
Is it flawless? Absolutely not. But I'm sharing the potential pitfalls with my clients so they can make an informed decision about how much risk they're willing to take.
Of course, that's as of this moment. Insurers could come out with new options or Washington, DC, could come out with new edicts that could change the landscape. But for now, we have to work with the options we have and the limitations within our current regulations, so that's my game plan for the foreseeable future.
Posted by Sharon Nuttall. Posted In : Annual Enrollment Period
