Short Term Medical Plans (STM)
Short-Term Medical Plans (STM) are insurance plans specifically designed to provide production for a limited duration usually from 30 days up to 364 days, depending on state rules. However, some insurers allow policyholders to renew short-term plans up to 3 years in total. It's also called temporary coverage to fill the gap between the enrollment period of primary insurance.
In short, think of it like a bridge between your loose coverage to new coverage enrollment.
Key points to remember
- Temporary coverage:
Fills cap when you're between jobs, waiting for new employer coverage or fewer months left before ACA open enrollment falls.
- Cost share:
Usually lower premiums as compared to ACA plans but have higher out of pocket cost, PR (deductible, coinsurance, copay).
- Flexibility:
Short-Term Medical Plans allows policyholders to choose coverage duration according to their needs or gap time. And also, policyholders have rights to cancel the plan at any time without penalties.
- Provider choice:
Short-Term Medical Plans normally uses PPO style coverage. However, some plans charge higher out of pocket cost if the provider is out of network.
Short-Term Medical Plans are ideal for?
These plans are ideal:
- If you missed open enrollment (ACA) for health plan or lost or left job.
- You may turn into a 26 and just transitioning off your parents health plan.
What Short-Term Medical Plan covers?
As STM plans are not in compliance with ACA, so, STM health coverage depends on plan types and varies from insurer to insurer, however, it covers doctor visits, emergency care, hospitalizations, some prescription drugs (depending on plan).
What Short-Term Medical Plans exclude or partially cover?
Preventive care:
STM plans generally, do not cover preventive care services, they denied, however, some plans cover these services but with limited scope.
Other ACA benefits:
STM plans do not follow / excludes coverages for pre-existing conditions, EHB benefits (specially maternity care, mental health and preventive care). Also not provide a guarantee coverage, plan can deny coverage based on health history.
Generally, these plans have higher deductibles as compared to ACA or other traditional insurance plans.
Examples:United Healthcare STM plans
Allstate Health Solution STM plans
Association Health Plans (AHP)
Association Health Plans (AHP) are health insurance arrangements designed for small businesses (employers) with fewer than 50 employees and for self-employed individuals. AHP allows companies owners (employers) within the same industry or profession to join together and purchase large group health insurance plans from insurer or even self-insured (take risk on their own). As remember AHP not a new type of insurance plan, it serves as a method for small employers to gain access to more affordable health coverage options.
Note: AHP are regulated under ERISA but are not compliant with ACA and are employer friendly while not ideal for employees.
How does it work?
AHP works like a traditional group health plan, but is not bound by the ACA regulations so, AHPs are not the same as large employers groups that can provide comprehensive care, as these are ACA compliance partially or fully.
Employers can design the plan like what services are included while others are excluded, i.e. employers can limited or exclude prescription drugs services while add more preventive care visits.
Additionally, participating employers must offer coverage to at least one employee who is not spouse of that employer.
Benefits Structure
AHP are not required to follow all 10 EHB of ACA specially mental health, maternity care, can exclude coverage for pre-existing conditions and also can charge a premiums based on health condition, age and gender, which are banned under ACA compliance plans, however, preventive care will be covered at 100% if included in plan benefits, this mean plan options can be limited.
There is no maximum health cost limit like ACA plans have in the form of out of pocket maximum.Cost Advantage
The biggest advantage of AHPs is their typically lower premiums, which are usually 10% to 30% less than ACA-compliant plans. These savings come from two main factors:
- Group purchasing power – associations can negotiate lower rates with insurers, provider networks, and vendors.
- Risk selection – AHPs often attract healthier individuals, leaving sicker individuals in ACA marketplace plans, which increases costs in that market.
Enrollment Process
Employers may join an AHP during the plan’s enrollment period, much like with other group insurance. Requirements for joining typically include details about the business type, prior year’s tax filings, and business location. Premium estimates are based on the number of employees, their ages, and their dependents.
In short, AHPs can provide small businesses with lower-cost health insurance by pooling together, but the tradeoff is reduced coverage, fewer consumer protections, and a history of instability. They can be a valuable option for some employers, but they require careful evaluation to ensure employees’ health needs are met.
How to Create Association Health Plans (AHPs)
Association Health Plans (AHPs) cannot be created by just any individual or informal group. They must be established by legitimate, formal organizations / businesses or well-structured associations that share a common professional or industry interest. These are often called Bona Fide Associations or groups of employers.
This requirement ensures that AHPs are legitimate health coverage options designed for businesses with shared interests, and prevents employers from using them solely to bypass insurance regulations.
Requirements to Qualify as a Bona Fide Association
- Legitimacy
The plan must be created by a formal, recognized organization of businesses or professionals.
- Primary Purpose
The association’s main role should be to support business growth and provide a range of benefits to its members.
Health insurance can be one of the benefits, but it cannot be the sole reason for the association’s existence.
- Formal Structure
The association must operate under a formal framework, such as by-laws, a constitution, or a governing board, to ensure accountability and proper management.
In summary: Only legitimate, well-structured associations with a shared professional or industry interest can create AHPs. This prevents random groups from forming solely to sell health insurance, helping maintain regulatory oversight and protecting participants.
The Role of MEWAs in AHPs
A MEWA (Multiple Employer Welfare Arrangement) is a benefits arrangement where two or more unrelated employers (not under common ownership) come together to provide health and welfare benefits—such as health insurance—to their employees.
Relation to AHPs
Many AHPs are structured as MEWAs, since they allow multiple small businesses in the same trade, profession, or geographic area to pool together and buy coverage as if they were a single large group.
Why it matters:
- MEWAs make it possible for small employers and self-employed individuals to access coverage similar to large-group plans.
- However, MEWAs are heavily regulated because some have historically faced solvency and fraud issues. Both federal law (ERISA) and state laws regulate them.
- The Department of Labor (DOL) oversees MEWAs to make sure they are legitimate and not just set up to avoid insurance rules
In short, to create an AHP, there must be a Bona Fide Association with a legitimate structure and purpose beyond insurance. Most AHPs are organized as MEWAs, which pool resources from multiple small employers but must follow strict federal and state regulations to protect participants.
Example of a Bona Fide Association Offering an AHP
A common example is when a local Chamber of Commerce sponsors an Association Health Plan. Chambers of Commerce represent a wide range of small businesses within a community, providing advocacy, networking, and business support. Since they already have a formal structure and a shared purpose of supporting local businesses, they qualify as a bona fide association under the rules.
Through the AHP, member businesses of the Chamber can band together to purchase health coverage for their employees at rates similar to those available to larger employers. This gives small businesses access to more affordable health plans and stronger negotiating power with insurers.
Farm Bureau Plans
Farm Bureau Health Plans are health coverage options offered through state Farm Bureau organizations. They are not ACA-compliant insurance but are often structured like association health plans or health benefit arrangements. The main idea is that farmers, self-employed individuals, and small businesses can band together under the Farm Bureau to get more affordable health coverage than what they might find on the ACA marketplace.
The benefits structure is the same as AHP however, currently these plans are properly working in three states Iowa, Tennessee, Kansas.
Grandfathered Plans
A grandfathered plans are old health insurance plans that were already in place on March 23, 2010, when ACA became law. The ACA allowed these existing plans to keep operating without having to follow all of the new rules, as long as they didn't make major changes. This exemption applied for those peoples who are already enrolled in coverage and are happy with it, also not ready to move to ACA, this exemption often called "Keep the coverage they already had."
However, grandfathered plans also regulate under ERISA and state laws, so these plans have some ACA impacts to follow, we'll explain in this chapter:
How does the plan stay in grandfather status?
Any plan created before March 23, 2010 can keep its grandfathered status only if it avoids big changes, these are:
- Cutting out certain benefits i.e. dropping or excluding coverage for a certain type of treatment.
- Raising deductible or other PR too much compared to medical inflation.
- Shifting more of the premiums cost to employees i.e. employers start paying less compared to what is decided before the law enacted.
If any employer or insurer does such a changes, then a plan loses its grandfathered status and has to follow all ACA rules as per guideline.
What ACA rules are exempt and what are applied on these plans?
Exampt rules:
- Does not follow ACA 9th EHB rule "preventive care at zero cost" i.e. grandfather plans can make a PR for such preventive care services.
- Does not need to cover all 10 EHB of ACA.
- Can exclude coverage for pre-existing conditions as well as apply premiums rates based on age gender and health conditions.
Applied rules:
- Does not apply limits on coverage i.e. these plans cannot apply annual or lifetime limits on 10 EHB (if included in coverage). However, can apply limits on other type of services not listed in ACA EHB.
- Have to provide coverage to eligible dependents up to the age 26.
In short,
For employees or individuals, being in a grandfathered plan often means fewer benefits compared to ACA-compliant plans, since preventive services may not be free and some protections don’t apply.
For employers or insurers, it can mean lower costs, since they don’t have to add all the ACA-required benefits.
In reality, the impact has been limited. Many grandfathered plans have disappeared over time because employers adjusted their coverage, which caused them to lose grandfathered status. The bigger issue for workers is usually how much their employer increases deductibles or premium contributions — not whether the plan is technically “grandfathered.”
Easy to remember:
A grandfathered plan is an older health insurance plan form before 2010 that was allowed to keep running without following all ACA rules. It can save employers money but may give employees fewer protections and benefits than newer ACA-compliant plans.
Health Cost Sharing Ministries (HCSM)
Health Cost Sharing Ministries HCSM is a faith based, non-profit organization / communities where members contribute monthly "shares" that are pooled to pay other member's eligible medical expenses. It's not insurance, but rather a voluntary cost sharing arrangement.
As many of these organizations / communities are usually religious base, so they asked individual to declare his / her faith to join. However, there are many other communities allow multiple faith people to join.
Description
As these plans are community or faith-based, not standard insurance, so, no ACA nor ERISA rules and regulations applies. However, these communities are also exempt from state laws except for those states who have specifically enacted legislation to regulate them. These plans can exclude coverages that grandfather plans excludes as well as deny some coverages based on faith including, contraception, absorption, etc. some other benefits like not covering dependent up to age 26 as well as can apply lifetime or annual limits / caps on coverages and also there is no guarantee on coverage as compared to ACA compliance plans.
Although, these plans have no out of network restrictions nor other types of restriction applied by the insurance companies also these plans covers services like hospitalization and major medical events, doctor visits and prescriptions and often cover unexpected, large medical cost due to emergency or unknown event occurs. Normally, coverages and benefits are depends on communities structure and operating ways.
Who can join?
People with healthy lives and want to contribute as religious beliefs can join such communities or the people who want alternative health coverage to traditional insurance system.
Example:- Medi-Share (Christian Community)
- Samaritan Ministries (Christian Community)
- Christian Health share Ministries
- Zion Health (all religious can apply)
- Sedera and Altrua
Click next to move to Indemnity Plans...(Partially Non-ACA Compliance Plans)
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