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Who is the Best Candidate for a Short Term Health Plan?

Who are the individuals that short term health plans are best for?

The deadline for the first open enrollment under the Affordable Care Act just expired. You didn’t sign up for a plan on either the federal exchange or the exchange in your state. Are you out of luck until November 15, 2014, when the next open enrollment period begins? Depending on your circumstances, you may still be able to buy a health insurance plan – with several limitations.

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Who Can Take Advantage of These Plans

These policies can be suitable for a short time for several groups of people, including those who are between jobs, under-65 retirees waiting for Medicare to kick in, young adults and those who have just landed new jobs who are waiting for employer-provided health benefits to begin.

When you look at a short-term policy, you’ll be immediately struck by how inexpensive they are. Using the zip code for Dona Ana County in New Mexico, you can expect to pay nothing for one of these plans. Accordingly, your coverage under such a plan is extremely limited. Looking at a Humana plan, the estimated annual cost is $0, as is your monthly premium. Your deductible will also be $0 and the plan covers health only. No coverage for prescription medications, mammograms or mental health coverage is provided. A second plan, offered by HumanaChoice, shows an estimated annual cost of $384 and a monthly premium of $32. The annual deductible is $0 and this plan covers health and prescriptions.

Short-Term Health Plans, aka Band-Aid Policies

If you missed the deadline to sign up for a health insurance plan under the Affordable Care Act, you’re facing a tax penalty. For 2014, this is $95 per family member. Insurance companies across the country have begun marketing short-term health insurance plans, and this can help cover you and your family in the event of a serious illness or injury.

A short-term insurance policy will cover a few services. Still, once you find one that meets your needs or those of your family, you’ll be subject to a laundry list of limitations. For example, such a plan won’t cover a pre-existing condition and, should you experience an illness, you won’t be able to renew that plan. That tax penalty? Even if you do sign up for a short-term plan, you’ll still be liable to the Internal Revenue Service for not signing up for a plan that’s compliant with ACA.

Not Major Medical Coverage

These short-term health care plans are not major medical coverage, even though some insurance companies are attempting to market them as “alternatives” to the plans available on state and federal exchanges. Read the fine print closely. Unlike the plans offered on the exchanges, these short-term policies reserve the right to turn you away if you are sick. They don’t cover your pre-existing condition, no matter whether it’s seasonal allergies or a past occurrence of cancer.

Do Not Comply With ACA

Don’t be fooled by these short-term plans. No matter what the printed policy promises, they do not come into compliance with the ACA, better known as Obamacare. When surveyed by eHealth in September, 2013, 20 percent of respondents said that short-term policies would comply with ACA, which shows the need for everyone to carefully read through and understand what they are thinking of buying.

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Some insurance companies are attempting to market these short-term policies as “comparable” to the plans offered on the exchanges while others state outright that their plans don’t meet the minimum essential coverage requirements.

Comparison of Short-Term Plans to ACA-Compliant Plans

A quick read-through shows you how a short-term insurance plan falls far short of the plans available through the exchanges.

Exchange plans can’t deny coverage for pre-existing conditions, cap benefits and must offer coverage to children younger than 26 on their parents’ plans. These plans must offer 10 essential health benefits, including preventative care, mammograms, prescriptions and mental health care.

Short-term policies can exclude coverage for pre-existing conditions, won’t cover routine physicals and have lifetime benefit limitations. If you have no alternative, a short-term policy can help in the event of an emergency – but when compared to an exchange-offered plan, it is “junk,” according to Karen Pollitz, who is a senior fellow with the Kaiser Family Foundation.

We feel that short term plans have their place and purpose and as long as you understand all of the positives and negatives you can make the decision for yourself.


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