Short-term plans can help people stuck in coverage gap

In a February 10th front-page story, the Wall Street Journal explains that millions of Americans are trapped in the ACA “coverage gap,” earning too much to qualify for Medicaid but too little to qualify for a subsidy.

This is an all-too-common problem in states that chose not to expand the Medicaid program, leaving people whose earnings fall between the Medicaid and Subsidy household income levels with no good options.

While these individuals are likely exempt from the individual mandate’s tax penalties since the lowest-priced qualified plan available to them (a non-subsidized bronze-level plan) would exceed 8% of their household income, many of these folks would nonetheless like to have health coverage.

The law definitely needs to be fixed to help families who are stuck in the coverage gap, but, in the meantime, agents who are trying to find a solution for their clients may want to recommend a short-term medical plan. These plans do not provide “minimum essential coverage,” but that’s ok since families in the coverage gap are probably exempt from the mandate. Short-term plans are also not guaranteed issue, which creates a problem for people like Ernest Maiden from Birmingham, Alabama, a 57-year-old hair stylist with diabetes who is profiled in the WSJ article.

So these plans won’t be a good solution for everyone, but for lower-income individuals who will qualify, short-term plans can give them some peace of mind at a much lower monthly premium than a qualified individual plan.

Another option that families who fall in the coverage gap may want to consider is a voluntary product like accident or critical illness insurance. While these policies do not provide comprehensive health coverage, they do offer some protection in the event of an accident or an illness at a fraction of the price of a full-blown health plan.

Agents who have a private exchange site are able to sell short-term plans as well as voluntary products along with the major medical policies that qualify for a premium tax credit.

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