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Why Buy Short Term Health Insurance?

Short term health insurance is a healthcare product that fits specific needs of individuals and families who aren’t quite ready to buy an Obamacare plan, or have an immediate need for health insurance coverage in the short term. Just like individual health insurance, short term medical insurance covers doctor visits, hospitalizations, emergency care, lab tests, prescription drug costs and more. Unlike enrolling in an individual medical policy, the short term application process is simple, many times providing next-day coverage in a matter of minutes.

So why doesn’t everyone have a short term health insurance plan? There are both multiple similarities and differences between major medical coverage and short term medical coverage. Here are the details

What is similar

Like individual health insurance, short term plans are comprised of insurance benefit basics you might be familiar with:

  • Deductible: The amount you must pay out-of-pocket first before your insurance company begins picking up the tab.
  • Coinsurance: Once your deductible is met, you have to pay a percentage of your medical bills, cost sharing expenses with your insurance company.
  • Out-of-pocket maximums: The maximum amount you have to pay out-of-pocket during the length of your insurance policy.
  • Prescription drug coverage: Rx coverage coverage varies by plan. Some plans require you to pay the amount of your deductible first, and then you are responsible for a coinsurance percentage of your drug expenses, while richer benefit plans have a copay option for generic or brand drugs.

Doctor office visit copays can also be included on richer short term plans. What’s not covered on short term insurance plans are things like maternity care and expensive speciality prescription drugs – things that require “long term” treatment or care.

What is different
  1. Short term medical plans are network-free. You can choose any doctor or hospital. With an individual plan, “out-of-network” doctors can leave you hanging with a large bill, especially if you did not realize a doctor you were referred to was out-of-network. In some instances, you don’t even have a choice – a physician might be in-network for a surgical procedure, but the anesthesiologist isn’t. Short term plans provide the freedom to see anyone. You are just responsible for your deductible and any additional coinsurance during the length of your policy.
  2. Short term health insurance plans typically cost one-half the price of individual health insurance plans. For illustrative purposes, let’s look at the life of “Joe American.” Joe is a non-smoker living in Chicago, age 40, who does not qualify for any cost assistance from the government for health insurance because he has made too much money during the year. He is at a crossroads of purchasing an individual health insurance plan or a short term health insurance plan. Joe is out of work currently, but anticipates getting a job in the next three months. Joe reviews the cost of individual health insurance on the state exchange, and a plan with a $6,800 deductible is $238 per month. On his strictly limited budget, he reviews temporary health insurance plan options. For $114 a month, Joe can get a short term policy with a $10,000 deductible. Considering he’s in excellent health and doesn’t plan to use his health insurance, Joe opts for the short term health plan at $114 a month, saving him $124 compared to the individual health insurance plan. Since Joe had an immediate insurance need and is healthy, a short term policy is an affordable option that will still help cover a catastrophic health event.
  3. Apply in 10 minutes or less versus hours of research and paperwork. The average American has 40-100 health insurance plans available to them on both the state exchange or federal marketplace, and off-exchange. That’s a lot of health plans to review! Short term health insurance is simple. There are typically just a few options, from low cost limited benefits to richer plans for those who need more coverage. No matter which short term option is selected, the application is extremely short.
  4. Short term health plans provide coverage when you need it, for as long as you as you need it. The average temporary plan can be available within 24-hours of application, compared to the two-week waiting period for an individual health insurance plan. Short term plans are also available for just 30 days, and depending on state of residence, up to 364 days. While short term medical plans cannot be renewed, many states do allow consumer to re-apply for a new short term plan when their current plan expires.
Other subtle details

Short term health insurance plans are not required to offer “essential health benefits” as mandated by the Affordable Care Act. In laymen’s terms, this means short term coverage does not have to offer preventive services, like well-baby checks or health exams for free. Companies can also deny applicants for pre-existing conditions, and cap coverage at a specific dollar amount.

Since short term health plans are not in compliance with the Affordable Care Act, they are subject to a tax penalty if an individual does not carry an essential health benefit plan for longer than three months. If you fall under the three month mark, you are not subject to a tax penalty.