Before you decide on short-term health insurance, it is essential to understand its key aspects and how it compares to long term medical plans. Short-term insurance serves as temporary coverage, with federal regulations since October 2018 allowing policies to last up to 12 months and to extend for up to 36 months, though state-specific durations may apply. You can reapply for coverage after each term.
Short-term health insurance caters to various situations, such as job transitions and aging out of parental coverage at age 26. However, before making a choice, it is crucial to fully understand what it covers.
What Does Short Term Health Insurance Cover
In most states, short-term health insurance offers coverage for several months to a year, with the option to renew for up to three years, thanks to recent changes in regulations. Health insurers have tailored these plans to bridge the gap between permanent policies, catering to individuals seeking quick and budget-friendly medical coverage.
Short-term health insurance coverage can differ significantly based on the specific plan and insurance provider you select. These plans are not obligated to adhere to the regulations set forth by the Affordable Care Act (ACA). ACA plans are mandated to offer a certain level of coverage known as minimum essential coverage, but short-term health plans are exempt from these same requirements.
Commonly, short-term medical insurance does offer some degree of coverage for preventive care, doctor visits, urgent care, and emergency care. There may be provisions for prescription medications. Some plans may additionally provide cost savings when you seek care from in-network healthcare providers. It is necessary to carefully review the “exclusions and limitations” section before purchasing any plan, as this outlines what is and is not covered by a specific plan.
Short-term health insurance plans are designed to address your healthcare requirements during transitional periods, such as job changes. While coverage details can vary by state, these plans cover a wide range of healthcare expenses for short durations. This includes routine doctor visits, hospital care, medical tests, and surgical procedures.
Despite federal relaxation of short-term health insurance rules, state-level regulations vary. Several states, including California, Colorado, Connecticut, Hawaii, Maine, Massachusetts, New York, New Jersey, New Mexico, Rhode Island, and Vermont, either prohibit or modify these policies.
Vermont, instead of an outright ban, has aimed to align short-term policies with essential health benefits required by Obamacare plans.
However, there are potential drawbacks to consider:
- Short-term coverage may not include benefits for maternity, mental health, or pre-existing conditions. Unlike ACA plans, individuals with pre-existing conditions might face denial.
- Not all short-term policies are guaranteed renewable, necessitating reapplication. Serious illnesses could lead to rejection.
While short-term health insurance offers value and quick affordability, it lacks ACA-level regulation. It should be viewed as a temporary solution, particularly in states that now permit longer-term coverage. Consulting licensed agents can help individuals navigate their health insurance choices effectively.
Who Should Consider Short-Term Health Insurance Plans?
Short-term health insurance plans are an appealing option for individuals seeking an affordable means of insuring themselves against unexpected or emergency medical expenses. This form of coverage is often considerably less expensive than ACA long-term medical health insurance. Unsubsidized ACA plans, on average, have premiums approximately five times higher than those of short-term health insurance. Even when considering subsidized Obamacare plans, their premiums are usually about three times higher than those of short-term coverage.
Short-term health insurance offers numerous advantages, including straightforward applications, modest premiums, and the absence of waiting periods for enrollment. This makes it an attractive choice for individuals who lack access to affordable permanent medical insurance. Here are some examples of individuals who can benefit from short-term health insurance:
- Young individuals who have recently become ineligible for coverage under their parents’ plans.
- Families who missed the Open Enrollment period for the ACA Marketplace.
- Seniors approaching the age of 65 who will soon receive Medicare benefits.
- New employees who must wait for their group benefits to commence.
It is important to note that even if you missed the Open Enrollment period for Obamacare, you may still be eligible for enrollment through a Special Enrollment Period. Various events, such as job-related group health insurance loss, divorce, marriage, changes in income, or relocation outside a network plan’s service area, can trigger a Special Enrollment Period. If you do not qualify for one of these events, you can still enroll in short-term health insurance at any time throughout the year.
What Is the Cost of Short-Term Health Insurance?
If you are considering short-term health insurance, the common upfront expenses include:
- Premium: This monthly fee covers your insurance, and the amount varies depending on the chosen coverage level, including the deductible, coinsurance, and covered services.
- Deductible: Short-term health plans often have notably higher deductibles compared to more traditional health plans. You are responsible for paying for services out of pocket until you meet your deductible, after which the plan begins sharing the costs.
- Coinsurance: This is the percentage of expenses you split with your plan after reaching your deductible. It is represented as a percentage. Most short-term plans incorporate a deductible and coinsurance.
- Copay: Some plans may require a copayment when you visit a doctor which you pay at the time of the visit.
- Other Out-of-Pocket Costs: If certain healthcare services are not covered or have limited coverage in your short-term plan, you may have to cover all related costs. For instance, maternity care, mental health or substance use services, vision care, or dental care might not be fully covered, necessitating personal payment for any received services.
Additional costs may apply depending on the type of coverage you choose. It is important to thoroughly review all plan details to understand the potential costs associated with your selected plan.
While the cost of each plan depends on the specific coverage needs of the insured individuals, individual coverage can generally be obtained for less than $100 per month. If you wish to cover yourself and a child, the monthly cost may be less than $130. For comprehensive family coverage, which includes your spouse and children, the monthly cost is likely to be under $200.
What Are the Advantages and Disadvantages of Short-Term Health Insurance?
If you are contemplating whether a short-term health insurance plan suits your needs, here are some pros and cons to consider:
- Designed to provide temporary coverage during gaps in your healthcare needs.
- Allows you to cancel coverage without incurring penalties.
- Offers coverage for up to a year if necessary.
- Various plan options are available, depending on the insurance carrier.
- Features significantly higher deductibles compared to traditional health plans, with possible unforeseen costs.
- Does not cover pre-existing conditions and provides limited coverage for most services.
- Approval for coverage may require a medical questionnaire.
- Coverage is not mandated or standardized, resulting in substantial variations in covered services and costs with limited government oversight.
Short-term health plans may not be suitable for everyone. For comprehensive coverage and benefits, it is advisable to consider enrolling in a traditional health plan, either through your employer or by purchasing one independently from an individual insurance company or the Health Insurance Marketplace.
Short-Term Health Plans vs. ACA Health Plans
Short-term health plans as stated earlier, were designed to address temporary gaps in coverage that can arise in specific situations. They are generally not suitable substitutes for traditional health plans and are not obligated to adhere to the standards set by the Affordable Care Act (ACA). Short-term plans offer limited benefits at relatively higher costs.
In contrast, ACA health plans must meet specific coverage requirements mandated by the government. They are obliged to provide coverage for essential health benefits such as maternity and preventive care at full coverage (100%), mental health and substance use benefits, and more. Before opting for a short-term health plan, it is better to have a comprehensive understanding of what types of healthcare services are included and excluded. Reviewing the exclusions and limitations information is crucial.
Since short-term health plans exist outside the framework of the Affordable Care Act (ACA), allowing them to bypass ACA regulations, they do not provide coverage for pre-existing conditions. It is possible to be denied coverage for medical issues for which you have previously received treatment.
How to Purchase a Short-Term Health Insurance Plan
Short-term health plans are offered by private insurance companies. Not all insurance companies provide this type of plan (e.g., Cigna Healthcare does not offer them). These plans are not accessible through the Health Insurance Marketplace and do not conform to Affordable Care Act (ACA) guidelines. To acquire a short-term medical plan, you can search for a private insurance company that offers them. Ensure you carefully read all the details before purchasing or enrolling, as these plans can exhibit significant variations in cost and coverage.