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What Is Short-Term Health Insurance?

Short-term health insurance is a quick and affordable option for people looking for some temporary healthcare coverage.

September 18, 2017 - By HealthCare.com Staff - read

When life leaves you without a health insurance plan, short-term health insurance offers protection from the unknown, which could include staggering medical bills.

What Is Short-Term Health Insurance?

Short-term health insurance, also known as temporary health insurance or short term medical, is easier to purchase than other insurance options. As long as your application and payment are accepted, you can be insured as quickly as the next day (or choose a start date within the following 30 days).

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Unlike Obamacare plans, you can apply for short-term coverage during any time of the year. Typically, someone can enroll in a short-term insurance plan in under 10 minutes from an online health insurance marketplace like HealthCare.com. Costs are often less than half of the price of a major medical health insurance policy. As an affordable bridge to your next health plan, short-term insurance provides limited coverage for a limited period of time.

There are many unique situations where buying a short term health plan makes sense. If you’re not able to buy a traditional plan until open enrollment, short term insurance is a great option. Students, travelers, and new employees waiting for their coverage to begin have traditionally been safeguarded by short term health insurance as well.

Protection from Financial Catastrophe

When it comes to medical insurance, having something is better than nothing. As a type of catastrophic insurance, short-term medical policies are designed to protect you from financial disaster. Since medical bills are the leading cause of bankruptcy in the United States, short-term coverage is a smart way to keep your savings safe.

Temporary insurance can reduce the cost you pay for unexpected serious illness or traumatic injury. While short-term health insurance often has a high deductible (such as $5,000 or $7,500), that cost is merely a fraction of actual charges for a major emergency – which could easily reach $100,000 or more.

While a higher deductible will lower the monthly premium, select a deductible that you can afford to pay. Some bankruptcies involve people who had insurance but couldn’t cover the deductible.

What Does Short-Term Health Insurance Cover?

You Will Get Emergency Care: Peace of mind from unexpected medical costs is a major benefit of short term coverage. If you’re seriously ill or injured, short-term insurance will cover the costs of your hospital visit. Short term policies also cover follow-up care for acute medical issues until your coverage ends.

You Can See a Primary Care Doctor: Nearly all doctors accept short-term insurance. You will receive a welcome letter, insurance card, and other familiar benefits when you enroll. Although you have to pay for care on your own before hitting your deductible, the costs for a visit once you do reach your deductible are generally low. Some plans also include a checkup, free of charge.

You Can See a Specialist: Specialized doctors (such as a dermatologist, orthopedist, or neurologist) are frequently covered by short term plans. Medical imaging (like x-rays) and mental health care are also common short term benefits.  Short term plans often bundle in additional benefits such as life insurance or prescription drug discounts as well.

Ongoing Health Problems Are Not Covered: Since short-term health policies are designed to take care of immediate health needs, they are unsuitable for long-term maintenance of health issues. Short-term plans rarely cover medical devices, dental care, or vision care. Prescription costs are typically the planholder’s responsibility outside of a hospital setting as well.

Short-Term Medical Providers Can Reject You Based On Pre-Existing Conditions

The Affordable Care Act, commonly referred to as Obamacare, requires insurance companies to sell health coverage to everyone, regardless of pre-existing medical conditions. However, that requirement DOES NOT apply to short-term health insurance. Short-term insurers can decline to sell you coverage based on your medical history, pre-existing conditions or health status. Individual claims will also be denied if they came from a pre-existing medical condition.

What Is a Pre-Existing Condition? Many pre-existing conditions are chronic conditions, including:

  • Arthritis;
  • Asthma;
  • Cancer;
  • Chronic obstructive pulmonary disease;
  • Congestive heart failure;
  • Diabetes;
  • High cholesterol; and
  • High blood pressure.

Most temporary policies exclude coverage for conditions that have been diagnosed or treated within a set period of time prior to the start of coverage. The length of time varies by state, ranging from the previous six months to five years. And, if you need to purchase another short-term policy after the first policy expires, a new plan may not cover conditions that developed during the term of the first policy. You can ask your insurance company what is covered before buying a plan.

Who Needs Short-Term Health Insurance?

Short-term plans are a go-to option for Americans who missed the 6-week open enrollment period, or for those who can’t afford traditional premiums. Fans of short term plans include:

  • New graduates;
  • New immigrants;
  • Students, particularly in between semesters;
  • Travelers, whether American citizens or not;
  • Individuals transitioning from one job to another;
  • Employees waiting to become eligible for workplace benefits;
  • Early retirees, who are waiting to qualify for Medicare;
  • Anyone losing eligibility for Medicaid or disability benefits;
  • People navigating changes within their family, such as divorce or aging out of a plan;
  • New insurance enrollees who are waiting for their ACA-compliant coverage to begin; and
  • Uninsured consumers who are ready to address as many medical issues as possible over 90 days.

Can I Use Short-Term Coverage Forever?

Current federal regulations limit short-term medical plans to 90 days of coverage. You can simply re-apply for coverage that becomes effective once your previous plan ends.

Option to Renew: Your insurer could also raise prices or deny coverage after every 90 period, as they must treat each enrollment as a separate application. Thankfully, companies make an effort to keep their customers. Most states have multiple carriers to choose from, each offering multiple coverage choices.

Some States Have Different Rules: Arizona, Colorado, Maine, Michigan, Nevada, New Hampshire, North Carolina, Oregon, and West Virginia each have extra guidelines that make it difficult to enroll in more than 2 short term plans per year. If you live in these states, you can ask your insurance company for help to stay enrolled. In Massachusetts, New Jersey, New York, Rhode Island, and Vermont, no companies are licensed to offer short-term coverage.

Are Short-Term Medical Plans Common?

Short-term policy sales jumped from 108,000 plans in 2013 (before Obamacare) to 160,000 plans sold in 2016. According to the Department of Health and Human Services, a growing number of individuals have begun to make short term plans “their primary form of health coverage.” Short-term policies are regulated by state insurance commissioners and are required to have sound financial backing.

Short-Term Medical or COBRA?

Under federal COBRA legislation, employees who lose their job can continue to purchase health insurance through an employee group for up to 18 months. If you purchase a short-term policy, you lose your right to COBRA insurance.

No Exemption from Uninsured Tax Penalty

Individuals can face a tax penalty for being uninsured, underinsured or insured by a policy that does not have the 10 qualifying essential health benefits required by law, such as temporary health insurance. The law does allow individuals to be uninsured for up to three months without penalty. In 2017, the penalty is $695 or 2.5 percent of adjusted annual income. For some people, the savings on premiums for short-term insurance may exceed the cost of the penalty.

No Premium Subsidies

Since short-term policies are not qualified plans, enrollees are ineligible for premium subsidies. Intended to help low-income and moderate-income families purchase their own health insurance, the subsidies are paid to consumers through tax credits.

Premium Costs:  STM premiums range from $25 to $600 per month, but are usually well under $100.If you pay your full short-term premium at once, you may receive a discount on the plan.

Choosing the Right Short-Term Plan

If you decide to get short-term health insurance, review the plans available in your state. Since there are many different situations where you might need coverage, it’s a good idea to consider what coverage is essential for you. Think about your specific health concerns, the speed at which you need care, and the rates you can afford when you compare the details of competing plans.

Some insurers offer plans with different benefits under the same brand. It’s important to look at multiple plans using an option like HealthCare.com’s plan selector tool. There are more than enough short-term policies available to cover you throughout the year.

You should also consider how much you’re willing to pay out-of-pocket. If catastrophic health issues are your main concern, you can purchase the cheapest plan with a 30 percent copay. You can also find a plan with higher premiums and no copay if you’re looking for a more comprehensive replacement for traditional coverage.

Taking the Next Steps

It’s you’re in between major health plans, or looking for temporary health insurance to fill some immediate needs, it’s worth doing additional research.

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Search our database of short-term health insurance plans at HealthCare.com.

Editor’s Note: This article was updated August 23, 2017 to reflect new federal limits on short-term medical plans.

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