If you’ve been shopping for health insurance, then you’ve probably come across “short-term health plans” or STHPs. Short-term insurance policies are touted by most health insurance companies as good alternatives to traditional coverage, but these plans come with a few caveats to keep in mind. Before you decide to skip major medical coverage in favor of temporary coverage, understand a few basic facts about short-term health plans.
What STHPs Cover
Many short-term health plans cover the same types of medical treatments that major medical insurance covers. If you fall and break your leg, for example, STHPs cover emergency trips to the hospital and follow-up care with your doctor. They also cover doctor’s visits for routine complaints such as colds, the flu, and regular aches and pains. If you need surgery, most short-term insurance plans will cover a portion of the costs. Temporary insurance works similarly to major medical insurance in that your insurer will cover a percentage of your medical costs up to a certain point.
Exclusions and Exceptions
The downside is that STHPs don’t always cover medical services that you might take for granted. Your annual physical may not be covered, for instance, or you might have to cover the total cost of a pregnancy out-of-pocket. Under the Affordable Care Act, major medical plans have to cover ten essential benefits, which include things like rehabilitative care, prescription drugs and hospitalization. Because short-term plans don’t have to meet the requirements of the law, your temporary coverage may not cover these or other basic services.
If you have a pre-existing medical condition or are sick when you apply for a short-term policy, the insurance company can reject your application. The ACA forbids insurers from doing this with major medical plans, but again, short-term policies are exempt from the terms of the law. Insurance providers hold most of the cards when it comes to STHPs, which means that their definition of a “pre-existing condition” may extend to situations like pregnancy. Before you sign up for a policy, check the terms of the contract carefully to make sure you’re covered for the things you need. Most people with pre-existing conditions aren’t eligible for short-term policies.
Flexibility in Coverage
Despite its limitations, temporary health insurance serves a purpose for certain people. If you graduate from college, move out from your parents’ home or find a new job, then short-term health insurance can bridge the gap in coverage until your major medical insurance begins. Volunteer workers who need proof of insurance while they’re out of the country may also take advantage of the flexibility that comes with STHPs.
Because these plans range from 30-day policies to yearlong contracts, you can choose the amount of coverage you need without getting stuck. Many jobs, for example, require employees to work for a certain period before their health insurance kicks in. With short-term insurance, you can stay protected while you’re waiting for a new policy to start.
You should note that STHPs don’t offer automatic renewal at the end of the contract. If you sign up for a plan and like it, then you’ll have to reapply for that plan. The insurance company is under no obligation to renew your policy. Insurers also reserve the right to drop enrollees from their policies, which is a practice that has been banned under the ACA for major medical plans.
One of the most convenient aspects of STHPs is that they can be purchased completely online without the lengthy application process typical of major medical plans. Most people get approved with a few minutes, and coverage starts as soon as the next day for people who pay their premiums when they sign up. Fast approval, minimal wait time and immediate use make attractive incentives for many enrollees.
Premiums and Out-of-Pocket Costs
Temporary health insurance policies cost about half as much as major medical plans. They aren’t designed to act as long-term coverage. Instead, they act as buffers against unexpected medical costs while you’re looking for a new job or waiting for a work-based policy to start. Low monthly premiums make STHPs a viable option for some, but you should keep in mind that a lower monthly premium usually indicates a higher overall deductible. This concept holds true with both short-term and major medical insurance plans.
How much you pay per month for a short-term policy depends on your medical needs and the coverage you choose. Health insurance website eHealth.com offers policies for less than a dollar per day for individuals, and many companies offer similarly affordable options for basic coverage.
Unfortunately, you might pay much more in out-of-pocket costs with a temporary plan. Many insurers set caps on how much they’ll pay out in claims with short-term policies. Plus, you might have to pick up a portion of the tab for your medical expenses even after you meet your deductible, which is often higher with temporary plans that it is with major medical insurance.
STHPs and the Affordable Care Act
The Affordable Care Act requires eligible Americans to have minimum essential health coverage, but short-term health plans don’t qualify. These policies don’t have to offer the same benefits or protections that the law now requires of major medical plans, and if you choose an STHP over major medical insurance, then you’ll be subject to the non-compliance tax when you file your return each year. Enrolling in short-term insurance can be a great way to protect yourself and your loved ones during temporary gaps in coverage, but there are some downsides to consider before signing up for a policy.