July 18th, 2016 BY HealthNetwork
Short term health insurance has surged in popularity over the years, even as the Affordable Care Act made traditional major medical insurance more accessible and more affordable. These temporary policies make sense in certain situations. If you’re about to graduate from college, travel as part of a humanitarian aid group or change jobs, short-term coverage can be a great way to protect yourself while you’re in transition or need proof of insurance. Since the enrollment period for major medical coverage only lasts for about three months each year, many Americans have opted to enroll in short-term plans if they miss the enrollment window. Without a qualifying life event, it’s the only way to get insurance in a post-ACA health care system.
Still, there are significant caveats to keep in mind when deciding on a Short-term policy. For starters, people with pre-existing conditions – which can include issues like diabetes, high blood pressure and even pregnancy – most likely won’t qualify for Short-term health insurance. These plans are designed for healthy people who need to bridge the gap between major medical plans. You’re likely to pay higher deductibles while covering more out-of-pocket costs, and you can’t renew your plan at the end of the term. Short-term policies also don’t count toward the minimum essential coverage requirement of the ACA, which means you’ll be subject to a penalty fee for not having major medical insurance.
Temporary coverage isn’t for everyone, but there are some benefits to having something in place during transitional periods. A single trip to the emergency room might set you back a few thousand dollars without any kind of coverage, and short-term plans typically cover ER visits. Once you’ve decided that a Short-term plan is right for you, take the time to ask your insurer the following questions before you sign up.
1 – What’s included?
Major medical plans in a post-ACA system have to cover 10 essential benefits. These include services like rehabilitative equipment, pediatric care, emergency treatments, hospitalization and outpatient treatments. Short-term health insurance is exempt from this provision of the law, and it covers much less than you might think. Temporary policies typically do not cover:
- Preventive care
- Maternity care
- Routine screenings
- Mental health services
There may be other restrictions as well. However, Short-term health insurance does cover emergency care, some hospitalization and other services related to unexpected illness or injury. You might also find plans with add-on features, such as limited dental or vision coverage. If you have a pre-existing condition, you may not find short-term coverage at all. Short-term insurers are not required to cover everyone who signs up. In other words, these policies are not guaranteed issue. Read the fine print of a short-term policy before buying it, and ask questions if you’re not clear about what’s covered. Some enrollees take for granted that temporary coverage offers the same protections as major medical plans, but there are some important distinctions.
2 – How much will it cost me?
Ask your insurer how much your plan will cost, starting with the monthly cost and term deductible. According to eHealth, one of the nation’s largest portals for buying Short-term health insurance online, the average premium cost for short-term policies rose slightly between 2013 and 2014. In 2014, an individual paid about $110 per month for coverage while a family paid $262. Despite the increase (7 percent for individuals and 17 percent for families), eHealth noted that major medical plans also saw a bump in premiums. The average monthly premium cost for an individual who bought major medical insurance during the ACA open enrollment period in 2015 paid $286 a month. Families paid $727. In terms of deductibles, the numbers are similar for short-term policies and major medical plans.
- In 2014, the average deductible for individuals with Short-term health insurance was $3,589. For individuals with major medical plans during the 2015 open enrollment period, the deductible was $4,120.
- During the open enrollment period of 2015, the average major medical deductible for a family was $7,760. For short-term policies, the deductible in 2014 was $8,566.
Short-term health plans aren’t designed to cover many services, which makes them cheaper for individuals. Families, on the other hand, require more care, making temporary coverage a more expensive option than buying coverage on a state or federal marketplace. Where you live also makes a difference in how much you’ll pay. In 2014, eHealth enrollees in Nevada paid premiums of $76 a month for individual short-term policies. On the other end of the spectrum, Californians paid $161 a month for individual premiums.
Golden Rule, the short-term insurance division administered by United Healthcare, offers individual plans for as low as $34.20 a month – with a $10,000 deductible. That means that you would have to hit $10,000 in expenses before Golden Rule paid its portion of the bill. Golden Rule does offer lower-deductible options. With a $1,500 deductible, you might pay anywhere from $68.70 to more than $100 per month in premiums. Here are a few factors to consider:
- Low premiums typically mean high deductibles.
- Not every tiered plan is the same. For instance, an individual plan with a $1,000 deductible can cost $181 a month or $70.
- Various factors influence how much you’ll pay, such as the coinsurance rate. The coinsurance rate is how much you’ll be responsible for on a medical bill. Some plans offer 70/30 coverage while others might be 80/20.
Aside from the costs of premiums and deductibles, you’ll need to ask about out-of-pocket expenses as well. Because temporary coverage is meant more for accidents or unexpected illnesses during a brief window of time, it’s not comprehensive. You may be responsible for a lot of upfront costs until you reach your deductible. Plus, the out-of-pocket maximum is much higher for a lot of Short-term policies than it is for major medical plans. The ACA caps out-of-pocket spending on major medical plans to $6,850 for individuals and $13,700 for families. This cap doesn’t apply to temporary coverage.
When comparing the costs of Short-term insurance policies, ask for a detailed breakdown of your monthly premium, term deductible, coinsurance rate, copayments for specific providers or services, and the out-of-pocket maximum on coinsurance. These figures should give you a better idea of what you’re paying for.
3 – How broad is the network of providers?
How many providers a company works with is important. It may cost more to sign up for short term health insurance with a major insurer, but a broad network makes a difference in overall cost and availability of service. Fox Business points out that buying a plan from an established insurer yields better, more negotiable rates than would be available from a smaller network. Reputation also matters. You should choose an insurer with good ratings, positive reviews and a known history of providing good products. Ask friends and family for recommendations. Researching an insurer’s network ahead of time could save you frustration and money in the long run.
If you lose your job, get married, adopt a child or go through a similar qualifying life event, you may be eligible to sign up for health insurance on the ACA marketplaces outside of the open enrollment period each year. However, you only have 60 days from that event to sign up. For most people, the open enrollment period is the only time during the year to get coverage, making short-term plans a good option for transitional periods. When you’re ready to sign up, ask the questions outlined above to make sure that you know what you’re buying. Short-term health insurance can be a great way to bridge the gap between major medical plans, so get the facts first before you take out a policy.