So you find yourself without health coverage for one reason or another, and do not have a qualifying life event entitling you to a special enrollment period. Your best option may be to enroll in a short-term medical insurance plan. Depending on your situation, there are several advantages as well as disadvantages to choosing this option, but before we get into those, let’s start from the beginning…
Under Obamacare (Affordable Care Act/ACA), individuals are able to enroll in long-term, major medical health insurance policies from November 1, 2015 through January 31, 2016, a time frame known as The Open Enrollment Period. Please note that this time frame is different every year and is not guaranteed to remain the same across years. However, these are the established dates as of 2015. During this time, individuals have the opportunity to browse and select an insurance plan online through the Obamacare Health Insurance Marketplace. However, if you fall outside of this open enrollment period and need coverage, a plan offering short-term coverage may be the route to take.1
Short-term Health Insurance Advantages
Short-term coverage offers many benefits in certain situations. One of the biggest advantages of a short-term plan is the price. These plans typically feature a lower monthly premium than what people are used to paying for more traditional, major medical plans. Another benefit to short-term coverage is that you can be covered almost immediately after completing your application- typically within the next 24 hours. This can be especially helpful when you are just trying to fill a gap in coverage, perhaps in the instance of transitioning from one job to another, waiting for new employer coverage to go into effect, for example.
Short-term coverage is available for as little as one month, up through a year, with the most common term being a 6 month period (some states only allow 6 month terms). Because this is intended to be a temporary solution, the option to choose the length of the policy can be convenient. Of course the largest advantage to short-term coverage is that it gives you the peace of mind knowing that you’re protected should an unexpected illness or injury occur.
Short-term Health Insurance Disadvantages
Although short-term coverage offers many advantages, there are some disadvantages to obtaining this type of policy as well. One disadvantage to this type of insurance is the fact that pre existing conditions are not covered. Under the Affordable Care Act, major medical plans are not permitted to deny coverage based on preexisting conditions. However, those rules do not apply to short-term medical insurance which are medically underwritten, meaning your health information is analyzed to determine coverage eligibility. This may be a big turnoff for some people, however, this stipulation is a contributing factor in the low cost of premiums associated with short-term plans.3
The second disadvantage is that even with short-term coverage, you may still be responsible for paying a tax penalty at the end of the year.2 Under Obamacare, every individual is required to have what is referred to as minimum essential coverage for at least nine months out of the year, otherwise be subject to a tax penalty. Job-based coverage, a Marketplace plan, Medicare Part A or Part C, are just a few examples of what is considered minimum essential coverage.
The plans listed above are required to offer ten specific essential health benefits: “ambulatory patient services, emergency services, hospitalization, maternity and newborn care, mental health and substance use disorder services (including behavioral health treatment), prescription drugs, rehabilitative and habilitative services and devices, laboratory services, preventive and wellness services and chronic disease management, and pediatric services including oral and vision care.” 4 Short-term plans do not cover these essential health benefits.
When a Short-Term Medical Insurance Plan Can Help You
There are a few scenarios in which a short-term medical insurance plan may be helpful. As previously mentioned, short-term coverage is useful when transitioning between jobs. Many employers require newly hired employees to wait before they are eligible to sign up for health insurance. The waiting period varies, but short-term coverage can help fill that gap in coverage until the new coverage kicks in. Another instance is children going to college. Many colleges and universities require their students to hold health insurance. Again, short-term coverage can tide over a student until a more permanent plan is able to take effect.
A short-term plan may also prove beneficial when a qualifying life event takes place, but you have not enrolled in a new insurance plan within 60 days of that qualifying life event taking place. When a qualifying life event occurs, you qualify for a special enrollment period to obtain a major medical plan. If you do not act within 60 days to sign up for the major medical plan, you lose your opportunity, at which point you may choose a short-term coverage plan.1
This list of possible scenarios in which short-term coverage may be beneficial is not exhaustive and does not include all potential reasons for short-term coverage. However, these are common situations that individuals may encounter, leading them to a short-term plan.
- Getting 2015 coverage with a special enrollment period. (n.d.). Retrieved August 28, 2015, from Healthcare.gov website: https://www.healthcare.gov/coverage-outside-open-enrollment/special-enrollment-period/
- Plan types that count as coverage. (n.d.). Retrieved August 28, 2015, from Healthcare.gov website: https://www.healthcare.gov/fees-exemptions/plans-that-count-as-coverage/
- Short term health insurance. (n.d.). Retrieved August 28, 2015, from The Office of Minnesota Attorney General Lori Swanson website: https://www.ag.state.mn.us/Consumer/Publications/ShortTermHealthInsurance.asp
- Essential health benefits. (n.d.) Retrieved September 3, 2015, from HealthCare.gov website: https://www.healthcare.gov/glossary/essential-health-benefits/