When it comes to short-term health insurance plans or STHPs, insurance professionals agree that there are certain advantages to buying temporary coverage. They also usually note that STHPs come with some important hidden strings. Temporary insurance makes a great choice for some, but you should note the drawbacks before signing up for a policy.
- Pro: STHPs typically cost about half as much as major medical plans.
- Con: Your out-of-pocket expenses may be higher with short-term insurance.
How much you pay for insurance will always depend on your specific situation and plan type, but in general, short-term health insurance costs much less in monthly premiums than major medical insurance. There are a couple of reasons for this. First, STHPs cover fewer medical services. You can see a doctor for a stomachache, but you may not be able to go in for routine checkups or maternity care. Also, short-term insurance demands higher deductibles, which make your premiums significantly lower. Families pay an average of around $150 each month for short-term coverage while individuals might pay around $70 per month.
On the downside, temporary coverage might strain your wallet when it comes to out-of-pocket costs. Because of the low premiums, insurers set much higher deductibles for STHPs. You might have to reach a cap of $2,000 or more before the company pays its share, and that share may not be 100 percent. Not only could you have to pay out-of-pocket for a 20-minute doctor’s visit, but you might also have to foot a portion of the bill even after you reach your deductible. STHPs also usually don’t set out-of-pocket maximums unlike major medical plans.
- Pro: You can sign up for an STHP any time, and coverage starts immediately.
- Con: Temporary coverage isn’t automatically renewable, and you can lose it.
One of the biggest selling points of short-term insurance plans is that you can sign up for them whenever you need, and your coverage typically starts the next day as long as you’ve paid for it. Major medical insurance can require lengthy wait periods, which is one reason why people sign up for STHPs in the first place. They need insurance to bridge the gap until their regular plan kicks in. With STHPs, you won’t have to worry about getting in an accident the day after you sign up because your plan will already be in place.
Unfortunately, flexibility works both ways. Insurers have a right to drop you from a policy for reasons they deem necessary, and you can’t renew STHPs the same way you might renew major medical coverage. If you like your plan, then once the contract ends, you’ll have to sign up for the same policy and hope that the insurance company accepts your application. There’s no automatic renewal for temporary policies.
- Pro: Short-term insurance works well for people who are young or relatively healthy.
- Con: People with pre-existing conditions won’t get coverage.
There are a few good reasons to buy short-term coverage. If you’re between jobs, waiting on employer-sponsored coverage to take effect, recently graduated or trying to apply for volunteer work that requires proof of insurance, short-term policies make sense. They offer convenient and affordable protection in the meantime. Young and relatively healthy people usually make the best candidates for STHPs because they don’t see doctors very often.
Young or not, people with pre-existing conditions will most likely not find a company willing to sell them a short-term policy. Unlike with major medical insurance, STHPs do not have to accept anyone who applies, and insurance companies can still deny coverage to those with pre-existing medical conditions. Keep in mind that “pre-existing” is a subjective term in the sense that insurers might consider something as short-term as pregnancy a pre-existing condition.
- Pro: Buying short-term insurance keeps you covered in a pinch.
- Con: STHPs do not comply with the Affordable Care Act.
There may be other times when short-term coverage meets your needs. Most people adjust their health insurance at least a few times during their lifetime as family needs change, and major medical insurance usually requires a waiting period for full coverage to take effect. During the gap, you’ll need something to help you out if the unexpected occurs. Car accidents, bouts of the flu and other medical situations will be covered by short-term health insurance until you can enroll in major medical coverage.
The biggest drawback right now with STHPs is that they do not qualify as minimum essential coverage under the Affordable Care Act. You have rights and responsibilities set forth by the ACA, and short-term coverage doesn’t protect you against penalties for not having insurance. It also doesn’t guarantee coverage for things like preventive visits or mental health care. Signing up for an STHP might give you peace of mind while you wait for major medical to take effect, but it’s not going to keep the government off your back when you have to pay the fine for non-compliance.