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Leaving Your ACA Plan for Short-Term Health Insurance

Last updated June 24th, 2020

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Affordable Care Act (ACA or Obamacare) health insurance comes with income-adjusted subsidies that help make the plans affordable in many cases. In all, close to 90% of ACA members get subsidies, including families earning up to six-figure incomes. However, that leaves just around 15% without subsidies, and many of them consider ACA plans with out-of-pocket maximums of over $8,000 for individuals and over $16,000 for families to be financially daunting So instead of renewing an ACA plan during the year-end open enrollment period, some individuals are opting for short-term health insurance (STM) as a bridge while they look for a more permanent and affordable healthcare solution, perhaps at a new job.

Primarily, short-term plans offer catastrophic coverage of serious new illnesses or injuries for around 90 days, though they can be renewed for up to one year in most states and up to three years.

If you’re interested in switching from more costly coverage and getting STM as a transitional insurance plan, here’s what you can expect while being covered by short-term plans.

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Review Your Health Needs From Past Years Before Moving to a Short-Term Plan 

Before you start actually switching over to STM, you need to carefully consider the level of coverage you used for the last year or two with your ACA plan. Because this is temporary coverage, it doesn’t need to legally cover the 10 essential health benefits that are standard in all ACA plans. Plus, services from supplemental plans for, say, dental or vision, will not be covered by the STM, meaning you’ll have to pay for that care on your own.

Ask yourself if you used these benefits: 

  • Vision care;
  • Dental care;
  • Coverage of preexisting conditions like diabetes, arthritis, asthma, cancer, high cholesterol, high blood pressure, chronic obstructive pulmonary disease, or congestive heart failure.

If you used any of those benefits with your old insurance, think hard about switching. It is unlikely that STM plans will cover those costs. 

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How to Cancel Your ACA Plan for Temporary Coverage

If you decide to cancel your ACA plan for everyone in your household, you can quit coverage online via a government Marketplace website with your login information. 

However, if you’re canceling healthcare for just one person, you will need to get in touch with your insurer to do it manually. Just know, there are a few things you should consider before leaving your ACA health plan.

What to keep in mind:

  • Understand that once you end your ACA coverage, you can’t re-enroll until the next annual Open Enrollment Period in the fall, so you may be without comprehensive health coverage for up to eleven months, depending on when you cancel your plan. 
  • However, you can request to end ACA coverage on a certain future date. While making the switch to short-term health insurance is generally quick (sometimes instantaneous), it’s best to coordinate the end of your ACA with the start of STM.

Pick a Short-Term Plan That Transitions You Off Obamacare

There are three things to keep in mind as you weigh switching to an STM: your medical needs since STMs essentially only cover catastrophic sudden illnesses or accidents; your financial situation; and how long you plan to use a temporary plan. 

Choose what you can afford by considering both your premium and your deductible. Generally, the lower the premium, the higher the deductible. Ask yourself: If the worst happens, how much can I afford to pay out of my pocket? Let’s say, you decide $5,000. If so, make that the limit for your out-of-pocket deductible, the sum you must pay before the STM starts chipping in. 

It’s important to not think of an STM as a long-term solution. Choose the plan that will get you through a transitional period — something that covers emergencies and other services you want, like a routine checkup. Balance the price against your needs and think of it as a safety net against emergencies until you secure comprehensive coverage.

Review Your STM Plan Info

Upon making the switch to short-term health insurance, you’ll get a service agreement and medical card in the mail that should clearly outline the terms and length of your coverage. Don’t just put the materials in a drawer until you need to use it. When you get this info you should immediately:

  • Read your Summary of Benefits to be sure it matches what you expect.
  • Review everything that’s covered and ask questions if you’re confused.
  • Mark the last coverage date in your calendar.
  • Set a reminder to renew or drop your coverage weeks before the deadline.
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Finding Doctors on Limited Duration Plans

One of the most stressful aspects about switching to new insurance is the prospect of finding a new doctor. But in many cases with STMs, finding a new doctor isn’t complicated. You may even be able to keep your current doctor.

That’s because STM insurance isn’t generally confined by plan networks. Instead, many doctors participate in STM plans. Just be sure to read your plan carefully to fully understand how to choose a doctor with your new insurance.

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Healthcare Costs To Watch Out for on Short-Term Plans

With your temporary health insurance, you can expect significantly cheaper monthly premium payments. But be aware that short-term plans are not recognized as adequate coverage and some states will charge you a penalty on your tax returns for not having adequate medical insurance. 

Many STMs have low premiums and high deductibles, which means you will pay thousands of dollars for treatment out-of-pocket should you get sick or injured. Short-term coverage is largely structured around deductibles, meaning you may have to pay for certain procedures upfront or pay high deductibles before the insurer will start sharing costs. That makes it imperative that you read the fine print before signing up so you understand all the costs you can expect. For example, the Kaiser Family Foundation reports a “typical short-term plan covers a maximum of $250,000 to $2 million in medical care,” which sounds like substantial coverage, but a serious car accident can quickly amass medical costs that top $250,000. 

Costs you may need to pay on your own, as reported by the Kaiser Family Foundation:

  • Mental health care: more than 40% of STM insurers do not cover mental care.
  • Substance abuse treatment: more than 60% of short-term health insurance plans do not cover this care.
  • Prescription drugs: around 70% of STM insurers do not cover drug costs.
  • Maternity care: no STM insurer was found to cover maternity care.
  • Some sports injuries: Some plans exclude injuries linked to organized sports.
  • Certain common procedures: it varies. Some short-term plans won’t cover acne, mole treatments, cataracts, and even hernias.

Transitioning to Your Short-Term Health Plan

Once your short-term health insurance begins, there’s nothing more to do. Keep your insurance card handy for real emergencies and above all try to stay healthy as you search for comprehensive health insurance to give you true peace of mind.

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