Short-term health insurance is a more compelling choice for Americans than at any other time since the Affordable Care Act (“Obamacare”) came into effect in 2014.
Previously, short-term enrollees had to do a bit of math: was it worth accepting an expensive insurance penalty in exchange for relying on a short-term plan? That tax penalty (the “individual mandate“) ends on December 31, making short-term plans far more interesting to people who are comfortable with this highly-customizable form of health insurance.
Short-term plans can give you a lower rate if you’re healthy. They don’t have to include coverage for services like newborn care that some people will never use. In contrast, Affordable Care Act plans must be full-featured, and charge their healthiest members nearly the same as their sickest members.
All in all, short-term plans cover basic medical needs at low costs – around 54 percent less per month than Affordable Care Act (“Obamacare”) plans, according to an October 2018 analysis.
The federal government has mandated that state insurance navigators promote short-term coverage options, saying that people who couldn’t afford Obamacare were “left behind”. And the government has extended the length of time that you can rely on an inexpensive short-term plan from a previous maximum of 90 days to a new maximum of 364 days.
“During open enrollment, it’s vital for individuals to size up their past healthcare experiences and current health needs when determining what type of plan to buy for the next year,” said Jeff Smedsrud, Co-Founder of HealthCare.com and CEO of short-term provider Pivot Health. “And then they need to spend time shopping and comparing what their options are. The key is to shop. No two plans are exactly alike, and no two consumers have exactly the same needs.”
Why do short term medical plans cost less than individual health insurance?
Short term health plans are a temporary coverage option. The longer time period that coverage is provided, the more expensive it becomes. Plans that cover individuals for 12 months are more costly than those for only 90 days. Short-term plans are not available in all states and are not required to offer essential benefits like an Obamacare (ACA) plan.
Are short term health plans a replacement for individual health insurance on the federal or state exchanges?
No. Short-term medical insurance is meant to cover someone temporarily (up to 364 days in many states). Short-term insurance carriers are also allowed to ask medical questions to determine eligibility. These plans are not for individuals who have a pre-existing condition or have been advised by a doctor that they need medical treatment in the near future. Those individuals should enroll in an ACA plan.
If I am eligible for a subsidy to pay part or all of the cost for an Obamacare plan, should I consider a short term plan?
In most instances, no. Obamacare plans offer more comprehensive benefits, and don’t exclude pre-existing coverage.
Is there a different type of doctor network for short-term plans? How are claims paid?
Every short-term medical plan is different, so it’s smart to check the network. Many plans do not have a doctor network, allowing you to see whomever you would like. In this instance, medical claims are paid based on the Medicare reimbursement scale, in which the amount paid is usually 25 percent more than providers are paid for treating those on Medicare. This allows consumers the freedom to see any physician they would like, which is especially helpful if they live in a rural area or don’t have network options that are convenient.
Do short-term health plans offer the same benefits as individual health insurance?
No. Since short-term plans are meant to be temporary, some services like maternity and preventive care are not covered. However, in some states, certain types of women’s wellness screenings are covered. A policy’s plan detail will provide all of the limitations the coverage would have.
I’ve read that short-term medical plans don’t cover prescription drugs or mental illness services. Is that true?
False. Again, not all short-term health plans are the same so it’s important to compare apples to apples when shopping for a new plan. There are some short-term medical plans that offer drug coverage and will pay for mental health services. Many offer doctor office copayments and urgent care coverage as well. Always read a plan’s details and fine print before buying.
If I am not eligible for an Obamacare subsidy, should I think about buying short-term medical?
Perhaps. It will certainly be less expensive. And, there is no longer a penalty for not buying coverage. However, there are risks if a person has very large, ongoing medical expenses. It could be a temporary fit, but not a permanent fit.
“As we begin the health insurance open enrollment period, there are many misconceptions about short term medical insurance in the marketplace. It can be very good insurance, despite what some skeptics claim but it’s also not a solution for everyone,” said Smedsrud. “It serves a niche market. Consumers need to know what to look for when shopping during open enrollment and learn about their options to ensure they get a health plan that’s right for them.”
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