Health insurance is more complicated than ever today. Are you required to carry insurance? Will you be financially penalized? Are you putting yourself at risk?
Health insurance plans are typically expensive and frustrating for many people. However, it’s important to carry health insurance in the event of a serious health problem – and if you don’t have it, it could seriously cost you. That’s where short-term health insurance can help.
What is short-term health insurance? Originally designed to provide gap coverage for people who lose their regular plans or miss enrollment deadlines, short-term health insurance was meant to be a solution for those in need of a temporary health insurance plan. However, with different rules, requirements, and changes each year, short-term plans and policies can be more complex than they seem.
Here’s what you need to know about short-term health insurance policies.
Short-Term Health Insurance Offers Just 90 Days of Coverage
Short-term health insurance plans are true to their name: they offer temporary, short-term coverage that protects you and your health. Currently, short-term policies offer just 90 days of coverage. This gives you three months of coverage that you can use just like a traditional annual policy. Short-term coverage is designed to cover gaps in health insurance coverage, which is why these plans can’t be used for long periods.
After the 90-day period, your insurance expires. You must then choose to either sign up for a traditional long-term insurance plan or you must apply for short-term coverage again. If you’re reapplying, pre-existing conditions could prevent you from being accepted.
Short-Term Plans Can Be Cheaper
One of the biggest benefits of short-term health insurance plans is their cost – they’re typically cheaper than comprehensive coverage. Because short-term policies are meant to fill gaps, many are bare bones plans, letting you save quite a bit of money each month while you figure out your next steps.
A short-term health insurance plan can cost as little as $124 per mont, NPR¹ reports. In comparison, traditional health insurance coverage costs an average of $393 per month. The savings are even bigger for those with serious health issues. According to CBS News², a health insurance plan purchased through the Affordable Care Act for a 40-year-old nonsmoker costs $481 per month. A short-term plan, on the other hand, could cost as little as $160 per month. That’s over $300 in savings in just one month – and nearly $1000 in savings over the 90-day coverage period.
You Might Pay More Out-of-Pocket Due to Higher Deductibles
Although you could save nearly $1000 by opting for short-term health insurance, there’s a hidden cost many people forget to factor into their coverage. The deductible of your plan is the amount of money you’ll have to spend before your insurance plan begins paying for your medical procedures and needs. And, with a short-term plan, your deductible will be high.
Typically short-term policies have deductibles that total thousands of dollars. Consumer Reports³ notes that deductibles can be as high as $5,000 or $6,500. The higher the deductible, the more you’ll wind up paying. Because you must pay the deductible out-of-pocket and many procedures aren’t covered by short-term plans, you could end up with a low monthly premium but extremely high medical costs for the entire length of your coverage.
For example, if your medical bills total $104,000, you’ll need to pay your $5,000 deductible first. Once you meet your deductible, your short-term plan will offer 20 percent coinsurance – which means you’ll have to spend $1,000 for every $4,000, according to eHealthInsurance⁴. In addition to paying these high costs, you’ll also have to pay any applicable co-payments. This could result in you paying as much as $10,000 due to your short-term coverage limits.
Short-Term Health Insurance Can Cover Gaps in Coverage
Short-term health insurance, despite some drawbacks, can still make sense for people facing gaps in their coverage or losing their coverage. If you can’t afford a traditional plan, short-term coverage can provide some protection against common health problems. It’s still important to do your research, check on the deductibles and compare plans.
Here are a few situations that make short-term plans a better choice than paying the price of a new annual plan:
- You’re between jobs
- You’re waiting for new coverage to begin
- You don’t have health insurance and missed open enrollment
- You’re waiting to enroll in Medicare
In any of these scenarios, you’re better off signing up for a short-term plan. If disaster strikes, your health takes a turn for the worse, or you need immediate medical care, you need to have insurance. Not having insurance is a far bigger financial and health risk than choosing a limited-time 90-day policy.
Short-Term Plans Offer More Limited Coverage
One important area in which short-term health insurance can be a detriment is in its coverage. Typically, short-term plans offer more limited coverage. There are restrictions on coverage that might limit the number of dollars per day, week, or month – and your policy could even limit the number of doctor’s visits and medical expenses you can use your insurance for. Some plans limit prescription drug coverage, leaving you with more out-of-pocket expenses.
Some of the most common exclusions of short-term plans include:
- Insurers aren’t required to accept people with pre-existing conditions.
- You must choose an in-network doctor.
- Some plans won’t cover sports-related injuries, cataracts, hernia repair, and treatments for injuries sustained while intoxicated.
- Immunizations and preventative care might not be covered.
Additionally, short-term insurance might require waiting periods before paying for certain procedures such as cancer treatments. It’s really important to read the fine print – for example, you could discover that no treatment is covered in short-term plans for the first 5 days.
Do Your Research Before Choosing Short-Term Health Insurance
It’s important to research short-term health plans carefully before settling on a plan for gap coverage. Many plans offer only limited coverage, cover only certain medical procedures or needs, or may come with hidden fees and costs.
Ultimately, short-term health insurance is a good idea for those who need a quick, brief solution to stay protected in the event of medical problems. These plans can prove useful for people who are facing transitions in their lives, offering low monthly premiums and affordable co-pays. Just make sure you do your research, considering and comparing different plans exhaustively before using one for stopgap coverage.
Like anything, it’s always a good idea to be aware of the latest research. We recommend comparing at least 3 or 4 options before making a final decision. Doing a search online is typically the quickest, most thorough way to discover all the pros and cons you need to keep in mind.