Short-Term Insurance Plans

Short-term health insurance plans were originally created to offer health care solutions to workers in-between jobs or other individuals who faced a gap in their typical medical insurance policy.

Often categorized as temporary catastrophe insurance, short-term medical plans are not comprehensive insurance plans and do not meet minimum Affordable Care Act (ACA) regulations for basic medical coverage. This means that purchasing a short-term health insurance plan will not prevent you from being penalized by the state through your taxes for not having adequate medical coverage, although this financial penalty is no longer in effect after 2018. Short-term health care plans do provide some coverage at significantly lower monthly or annual premiums that can sometimes be satisfactory for a relatively healthy person.

Not everyone is eligible for participation in a short-term insurance plan. For example, unlike ACA compliant plans, short-term health care coverage providers are not barred from denying applications for program participation to individuals with pre-existing conditions. In addition, the level of coverage for both routine and emergency care with most short-term insurance plans is significantly less than with most full health insurance plans. Enrollees may be able to save on monthly premiums by joining a short-term health care program, but other out-of-pocket costs like deductibles and coinsurance payments are generally much higher than with typical insurance plans and the enrollee must still pay the tax penalty by the government for not having ACA compliant coverage. Short-term insurance policies began to be used as an alternative to ACA policies in recent years, especially for young adults, but they may not always be the most cost-effective option even for those who prioritize low costs. Keep reading to learn more about how short-term insurance plans work across the country and what are the overall pros and cons to choosing this type of health care coverage.

Eligibility Requirements for Participation in Short-Term Insurance Plans

Short-term health insurance policies do not meet minimum requirements established by the ACA, and this means that these plans do not have to follow the same restrictions and regulations. Due to this, short-term providers can deny people who would otherwise qualify for insurance through ACA compliant providers. Applicants who fall into any of the following categories are may receive an automatic denial of coverage:

  • People who are pregnant
  • Individuals who qualify medical coverage under Medicaid
  • People who are currently covered under another health care policy
  • Men who weigh over 300 pounds or women who weigh more than 250 pounds
  • Individuals who have been diagnosed with or already treated for HIV or AIDS
  • People who are not American citizens or legal residents of the United States

A common reason applicants are rejected for enrollment in a short-term insurance plan is for having a pre-existing health issue. Known as guaranteed-issue insurance policies, short-term health plans are not legally required to take on an enrollee who will most likely cost the insurance provider more than the provider might make in profit from the applicant’s premium payments. Remember that lying about a pre-existing health issue on any legal documents can be considered fraud and could result in the immediate cancellation of your health insurance policy or even legal persecution. Some short-term policies may also be less likely to offer you a new plan if you have had another in the past with which you filed a significant claim. Most short-term insurance policies are nonrenewable, meaning you must reapply for coverage at the end of your coverage period if you want to continue receiving health care under the same plan.

Medical Coverage and Most Short-Term Insurance Plans

Short-term insurance policies provide less medical coverage than full health care policies. They are not regulated by the ACA and are not required to meet any legal coverage requirements in most states. Up until recently, short-term insurance plans were available for a period of one to three months. The coverage period can vary for short-term health insurance providers Short-term insurance plans are intended to cover enrollees for unexpected illnesses or injuries, often including coverage for health needs like these in eligible situations:

  • Emergency room treatment
  • Ambulance, including ground and air transport
  • Many diagnostic services like X-rays, laboratory tests and analysis
  • Some inpatient and office doctor visits
  • Knee injuries or conditions
  • Hospital rooms
  • Organ, tissue, bone marrow transplants
  • Surgical services
  • Intensive or specialized care
  • Outpatient hospital surgery or ambulatory surgical center

Note that short-term insurance policies do not provide any medical coverage for many common health care needs that you may expect to be covered. As a policy geared towards coverage for catastrophes, preventative medical care and services are not usually included in the plan. Short-term medical plans also very rarely cover maternity or prenatal care. In addition, these plans generally do not provide any coverage for outpatient prescription drug costs. With most short-term insurance policies, medical care for vision, dental and mental health are also almost always excluded from coverage benefits.

General Out-of-pocket Costs for Enrollees of Short-Term Insurance Plans

Out-of-pocket costs for most short-term insurance plans can be relatively difficult to calculate because of the many different types of fees and limitations that affect your final expenses. Every insurance policy requires plan enrollees to pay a monthly or annual premium for participation in the program. High premiums are one common reason people opt for short-term insurance policies – they tend to have lower regular premiums that ACA compliant health care policies. In addition to the policy premium, however, short-term insurance policyholders must pay a combination of deductible payments, coinsurance fees and copays in order to take advantage of the plan’s benefits in addition to whatever portion of medical costs are automatically designated to you. Some short-term health plans often have an out-of-pocket cost contribution limit, but many do not. This limit caps how much the policyholder can be asked to pay through a combination of deductibles, copayments and coinsurance.

The deductible is the amount of money that you must contribute towards your medical care before your short-term insurance policy kicks in and starts providing coverage. Some deductibles are on a per incident basis, though most must be met only once annually. Once you have met your deductible, you will have to make coinsurance payments up to the stated limited of the short-term policy, if there is one. If a certain short-term insurance policy has an agreement with a policyholder offering 70/30 coverage, that person would be required to pay up to 30 percent of all medical costs. Many short-term insurance policies also require program enrollees to make copayments for many types of medical services. Copayments are a flat fee paid at the time of service by the enrollee according to a set schedule of fees. Though less common in short-term insurance policies than in typical health care plans, some plans require copays at the time of every urgent care visit.

The Overall Pros and Cons of Choosing a Short-Term Insurance Plan

There are many pros to purchasing a short-term insurance plan. Lower upfront premium costs and flexibility to last for brief periods of time in-between when you can apply for more robust medical coverage attract many insurance shoppers. Some estimates find that short-term medical plans cost an average of about 30 percent less than the average full health care plan. Along the same lines, these types of health care plans usually allow policyholders to customize their plan to meet their specific needs and avoid having to pay for coverage they do not need. Another benefit of short-term health insurance plans is that they do not have an enrollment period, allowing individuals to submit an application for a new at any point during the year. Most short-term insurance policies do not have health care provider network restrictions, therefore allowing enrollees to keep seeing the doctors of their choice. Some people enjoy the fact the short-term insurance policies can be used in accordance with other health care savings programs like hospitals plans, dental plans and vision plans.

The savings someone can gain by choosing a short-term insurance plan over an ACA insurance plan can disappear in an instant if the policyholder becomes sick or injured and has to pay the relatively high deductible, copayment or coinsurance costs associated with most short-term plans, however. Even more, short-term insurance plans do not over comprehensive medical coverage. There is a significant chance that a medical service you may need in the future will not be covered or not be covered to an affordable extent if you choose to go with a short-term health plan which was only ever meant to provide coverage in a catastrophe. In addition, because you have to reapply for coverage every time your agreement is finished, you could lose your short-term coverage with an insurance provider if you now are considered to have a pre-existing condition or you meet some other disqualifying factor. Simply having to go through the application process for recertification on a yearly basis can be taxing as well, especially given the fact that you will still be getting penalized by the federal government for not having an ACA compliant insurance policy.

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