When Short-Term Health Insurance Works (and When It Doesn’t)


December 7, 2017

Because of new rules and regulations, the health insurance industry is always changing. At times, people find themselves in between major long-term insurance plans as a result of these constant changes. This is when gap or short term insurance can be useful. However, when is short-term coverage a good idea? Below is some important information that you need to know about short term policies.

What Is Short Term Health Insurance?

Short term insurance is a type of temporary coverage designed to help people with healthcare services in between major insurance plans. In general, short-term coverage is designed to protect you against major illnesses and accidents. However, it doesn’t offer the comprehensive coverage that traditional, long-term insurance provides. For example, short-term policies don’t typically cover immunizations, preventive care or physicals.

What Are Some Benefits of Short Term Coverage?

There are many benefits that come from choosing short-term insurance. Some of the most notable include

• choose the length of your plan, typically between three to 12 months;
• a low cost, temporary alternative to traditional insurance;
• quick approval with coverage the next day in some cases;
• fills the gap between major insurance coverage;
• buy at any time, not just during Open Enrollment;
• skip network restrictions and visit your preferred healthcare provider in most cases; and
• customized deductibles and coinsurances to pay what you want.

While most short-term insurers allow you to visit whichever healthcare provider that you want, some also offer preferred provider organization (PPO) plans. In general, these provide discounts if you choose doctors within the PPO network. Once again, you don’t have to go with a PPO plan. That’s just one of the benefits of choosing a short-term health policy.

Who Is Short Term Insurance Right For?

This type of temporary coverage isn’t designed to be a long-term solution for your healthcare needs. However, short term health policies still have a place within the medical insurance industry. For example, it’s a good option if you miss Open Enrollment and don’t qualify for Special Enrollment.

This type of insurance is also great for young adults who come off of their parent’s insurance and need some coverage before they get long-term plans. On that same note, it’s a good option for those who lose coverage as the result of divorce.

People who are in between jobs also find that short term insurance is a good option. They might even prefer to get a short term plan as an alternative to COBRA insurance, which stands for the Consolidated Omnibus Budget Reconciliation Act. This federal law went into effect in 1985 to give workers the right to continue to use group health plans after being let go from their jobs.

There are many other examples of people who can benefit from short-term coverage, including people who are

• healthy and under the age of 65,
• waiting for the health insurance from their new jobs to kick in,
• waiting for their Affordable Care Act (ACA) coverage to start, and
• waiting for Medicare benefits.

These are just a few examples of people who can benefit from short-term insurance. While there are numerous situations in which it can help people, there are a few things that you should know before getting short-term coverage.

Short Term Coverage and the ACA

Many people wonder how short-term insurance and the ACA fit together. However, short-term policies don’t help you avoid the ACA fee for not having coverage. The government doesn’t consider them to be comprehensive enough to meet the criteria for minimum essential coverage.

The ACA, which some people refer to as Obamacare, requires that health plans meet certain standards to be considered acceptable health coverage. People who fail to have health insurance are hit with penalties. The ACA requires insurance to provide coverage in 10 critical areas, including

• doctor visits and outpatient care services,
• hospitalization,
• emergency services,
• newborn and maternity care,
• prescription drugs,
• laboratory services and tests,
• pediatric services such as vision and oral care,
• preventative healthcare and wellness,
• rehabilitative services, and
• mental health and substance use disorders.

Short term healthcare doesn’t provide enough coverage to meet the minimum standards that the ACA has set. Also, short-term insurance typically doesn’t provide coverage for preexisting conditions.

Important Things That You Should Know

Short-term insurance is a great option for some people. However, there are certain things that you should know to avoid any surprises. First, it only covers major health crises. Don’t expect a short-term plan to provide discounts on prescription drugs, doctor visits or preventative healthcare services.

There’s also a limit to how long you can take advantage of short-term healthcare. Most policies are available for a one-month window. However, some plans last longer. In general, the longest that people can have a specific short-term plan is between three and 12 months. Once the policy ends, you can enroll in a new one. However, it’s not a good idea to use short-term coverage for an extended period of time.

In addition, anyone can be rejected or denied coverage when they apply. Short-term plans aren’t held to the same standards as traditional health coverage. For example, long-term plans that qualify for the ACA can’t deny people because of their medical history. Short-term providers can. In 2014, nearly 12 percent of applicants who applied for short-term policies on EHealth were denied for medical reasons.

Low Cost, High Deductibles

Short-term insurance tends to have lower premiums but there’s a catch. They provide very few benefits in terms of coverage. In some cases, the deductibles are pretty pricey unless you want to pay more. Of course, short-term policies aim to attract millennials who may have failed to apply for insurance during Open Enrollment. The average age of people who applied for short-term insurance in 2015 was between 18 and 34.

Also, most short-term plans don’t cover the cost of maternity leave. If you or your spouse becomes pregnant while on gap insurance, most policies won’t provide maternity benefits. They won’t even cover the cost of prescription drugs.

Is Short Term Insurance Right for You?

In the end, short-term coverage has pros and cons just like most insurance policies. To determine if short term insurance is right for you, you have to look at your needs. Are you looking for an insurance policy that can fill the gap between traditional insurance coverage? If so, then you may want to consider a short-term policy. Also, sometimes a short-term plan is a great fit despite the ACA fee that you’ll have to pay for not having traditional insurance. If you’re looking for a long-term solution or have preexisting medical conditions, however, short-term health insurance might not be the right fit for you.