With the health insurance tax penalty going away in 2019 for those who do not enroll in Affordable Care Act-compliant health insurance plans, many healthy individuals will be attracted to short-term medical plans as a substitute. Short-term medical plans are designed to cover you in case of an accident or illness and many Californians have used these plans to fill a gap in coverage before they are able to re-enroll at the annual Open Enrollment Period. However, California Senate Bill 910, introduced by Senator Ed Hernandez (D – West Covina), would ban short-term medical plans entirely from the state.

SB 910 has already passed California’s Senate and is awaiting a vote from the State Assembly. With this legislation likely to pass, we will finally see some counters from the California legislature to combat federal deregulation of the health insurance marketplace. On the other hand, what options would be available for those that fail to enroll at Open Enrollment Period or have a temporary gap in coverage during the Special Enrollment Period? As independent insurance agents, we often come across clients who need a short-term plan for as little as one month before they are covered on an employer or individual plan. One common example is during the Special Enrollment Period, you must apply by the 15th of the month for many qualifying life events to have a plan effective the following month. Oftentimes, prospective clients will contact us after the 15th of the month and they will have at least 1 1/2 months without coverage unless we provide them short-term medical to fill the gap. Having a complete ban on short-term medical may create more problems for individuals in these unique circumstances while protecting the flow of risk pools.

As independent insurance agents, we were surprised to see California did not create their own state tax penalty for not having health insurance to help stabilize the ACA-compliant insurers’ risk pools like in states such as Massachusetts and New Jersey. The biggest concern for insurers as well as the chronically ill is that healthy individuals will flock to these short-term medical plans or will simply not enroll in health insurance at all as there would be no financial punishment for not having ACA-compliant health insurance. This, in turn, would spike premiums for comprehensive plans as the risk pools would have a higher concentration of sick individuals.

With that in mind, it is understandable that California’s legislature would try to protect the risk pools to prevent skyrocketing premium hikes. The state is seeing an 8.7% weighted average premium increase for the individual health insurance market in 2019. Covered California stated that if the health insurance mandate was still in force in 2019, we would be seeing a more modest premium increase of roughly 5% based on an estimated 262,000 more individuals enrolled.

At Solid Health Insurance Services, we will always strive to keep our clients informed about the healthcare trends and changes to the state and federal legislation around the Affordable Care Act and short-term medical. Our mission at Solid Health Insurance Services is to find for you affordable health insurance, life insurance, long-term care insurance and travel insurance which fits your medical needs and budget for your individual, family and business needs. Please contact us at 310-909-6135 or at info@solidhealthinsurance.com.