Short Term Health Plan Coverage in a Growing Gig Economy
- By Deb Shields
These days, individuals are increasingly turning to self-employment, freelance jobs, consulting and contract employment opportunities, contributing to a gig economy that experts say is now growing at a faster pace than the traditional employment market. Prevalent among millennials and baby boomers, gig employment offers workers the freedom to pursue their passions and interests, the flexibility to create their own schedules, and the ability to earn income as needed.
But for all of the perks of being a gig worker, there also can be some challenges. The rewards typically associated with traditional full-time employment, such as a steady paycheck, paid vacation time, health insurance and employer-sponsored benefits, often aren’t readily available to gig workers. Instead, these individuals have found it necessary to keep their fixed costs lower, save more and creatively build safety nets for retirement savings.
Health care coverage is an area in which self-employed entrepreneurs and contract workers can be particularly vulnerable. Because they don’t receive employer-sponsored health insurance, many individuals consider purchasing Affordable Care Act (ACA) coverage through the marketplace exchange – only to find that the costs are much higher than they can comfortably afford. But without adequate health insurance coverage, even healthy individuals can run the risk of a financial catastrophe should a medical illness or injury occur.
That’s why it’s important for gig workers to find cost-effective insurance alternatives, such as short term health insurance, which provides fast, flexible coverage for individuals who may need to adjust their insurance needs frequently, depending on their employment situation.
What Is Short Term Health Insurance?
Short term medical provides basic health care coverage for a designated period of time. It typically covers medical services such as hospitalization, surgery and doctor visits.
Most short term health insurance plans offer deductible and copayment amounts to meet your budget, and a significant maximum benefits amount per coverage period. Some plans will provide coverage for preventive care visits, prescription drug benefits and discounts on vision care services and products. Because short term health insurance is not regulated by the ACA, it is not required to provide the 10 essential benefits that all ACA-compliant plans must provide. So, it’s important to check your short term medical policy’s details, as benefits may vary by plan.
How Do I Know If Short Term Health Insurance Is Right for Me?
You might find short term health plans a cost-effective insurance solution if you:
- Can’t afford to purchase coverage through the marketplace exchange
- Missed the annual open enrollment period for Obamacare and don’t qualify for a special enrollment
- Have a short window of time before you become eligible for a more permanent insurance solution, such as Medicare
- Are turning 26 and coming off your parents’ insurance coverage
What Will Short Term Medical Cost Me?
A key advantage of short term health insurance is that it can cost significantly less than premiums for marketplace exchange coverage. Young adults still on their parents’ insurance plan, or about to come off their parents’ plan might find their short term medical premiums cost nearly 50% less per month, based on their benefit needs and age.
Although the Affordable Care Act law stipulates that you are responsible for paying a tax penalty if you don’t have ACA-compliant coverage, you may be exempt from paying that fee if the marketplace exchange plans available to you will cost more than 8.1% of your household income. If this describes your financial situation, you can purchase short term medical coverage and not have to pay the ACA tax penalty. (The new tax reform bill includes elimination of the tax penalty for not having ACA-compliant coverage, however, that change does not take effect until 2019.)
While industry experts are hopeful that ACA premiums will stabilize and become less costly, it’s important to make sure you have financial protection should a medical emergency occur – and short term health insurance can affordably provide you that protection.
How Do I Get Coverage?
The great news is that you can enroll in a short term medical plan at any time of the year. You don’t have to wait until an annual open enrollment period, or experience a life-changing event to qualify for a special enrollment period, as you would to enroll in a marketplace exchange plan. It’s simple, fast and convenient to enroll in a short term health insurance plan. You’ll simply answer a brief medical history when you apply, and you usually can select a coverage start date as soon as within 24 hours of applying.
Despite current federal regulations limiting short term plan coverage for up to 90 days per certificate of insurance, President Trump recently signed an executive order authorizing the appropriate federal agencies to craft new rules enabling short term medical plans to last up to a year, and also making them renewable. For healthy individuals, steering clear of a costly marketplace exchange plan and choosing short term medical might be a good financial bet.
In the meantime, some states allow you to apply for and purchase up to four back-to-back short term health certificates at one time. This process means you won’t need to requalify at any point during your coverage period.
Should you decide to shop for a short term medical plan, do your homework. You’ll find that some plans may offer a 10-day “free look” period, which means that if you purchase a plan and cancel within the first 10 days, you’ll receive a full refund of your premiums as long as you haven’t filed any claims.
Other Advantages of Short Term Medical
Not only does short term health insurance provide you financial protection in case of a medical emergency, at an affordable cost and with great flexibility to stop and start coverage as needed, you’ll also find that this type of plan offers you the freedom to visit the medical providers and facilities you want. This is a striking difference compared to marketplace exchange plans.
New figures show that nearly one-third of all exchange enrollees are limited to one ACA insurance plan option, with narrow provider and medical facility networks. Benefits are often paid differently for “in-network” providers than for “out-of-network” providers. But with short term medical, you may visit any doctor, anywhere, with no network restrictions.
How to Achieve Success as a Gig Worker
All signs indicate that the gig economy is not only here to stay, but will continue to grow. According to a 2016 study by the Minneapolis Fed, approximately 37 percent of working-age individuals in the U.S. engage at least part-time in independent work. By 2020, government economists estimate that 40 percent of Americans will be working outside traditional full-time jobs. While some casual earners choose to work independently for supplemental income, an increasing percentage of gig workers are deriving their primary income from their independent work (which may include several different gigs to provide multiple income streams).
Traditional side jobs, such as tutors, pet sitters, nannies, handymen, etc., have been around for decades, but what’s significant about the growing gig economy movement is that gig workers are now expanding into white-collar professions such as health care, consulting, finance, law and technology. More businesses are recognizing the changing work environment, and additional opportunities will continue to present themselves to gig workers. Companies will become agiler at onboarding new talent focused on skill, rather than career development, and off-board skills that are no longer needed in the workforce. Technological advancements, such as virtual reality, will more easily enable gig workers to contribute remotely and connect with in-office employees more effectively than ever before.
Whether it’s a baby boomer who has decided to enter the self-employment world after a career as a full-time employee, a gen-Xer who is leveraging professional skills as an independent entrepreneur, or a millennial just starting to build a career, the key to successfully maintaining your gig business is financial wellness.
Financial experts counsel gig workers to follow these steps:
- Establish a sensible budget and stick to it.
- Build an emergency fund. Especially when working with income streams that may flow or trickle at any given time, setting aside money for household/car repairs or health care issues will help provide you peace of mind.
- Plan for your long-term safety, by purchasing health care coverage, investing in a retirement fund, and checking into benefits offered by professional associations.
Becoming your own financial and benefits advocate is a high priority for gig workers, who usually don’t have the same access to employer-sponsored benefit and retirement plans as traditional employees.
If you’re an entrepreneur, independent contractor or consultant, or a freelancer, thriving in the growing gig economy is a reality. Invest your time in creating financial security for yourself by saving for the future, protecting yourself from health care emergencies with affordable, flexible coverage such as short term medical, and enjoy the freedom and many lifestyle benefits that are such an attractive feature of being a gig worker.