Growing Trend: Short Term Health Insurance
Every year health insurance costs increase, and many times insurance plan deductibles also rise at the same time, hitting consumers with a financial double-whammy on their annual health care expenses. But a growing trend in the health insurance space is purchasing alternative insurance like short term health insurance.
How popular are short term health plans and plans not offered by employers? In 2013, 13.8 million individuals purchased non-group insurance. By 2016, that number neared 22 million. In just three years the short term medical and non-group market saw a spike of more than 8 million new buyers.
Why are so many people leaving traditional health insurance plans and moving to non-group insurance like short term health?
Growing “Gig” Solopreneurs Paving The Way
At the end of 2016, the percentage of new entrepreneurs starting their own companies was 7.4% – the highest it had been in four years. In fact, the number of self-employed people in the United States grew to 8,751,000 by the end of the same year. A rebounding economy, easy-to-obtain credit and hopes for an Obamacare repeal and tax reform under the Trump administration were all cited as reasons in a research study of entrepreneurs by Challenger, Gray and Christmas.
For those who do not have access to employee benefits and must purchase health insurance on their own while starting a new business, the health insurance marketplace can be an expensive and dark rabbit hole. That’s why alternative insurance products like short term health plans can be an option for individuals who need budget-friendly coverage and confidence their insurance will be there when an unexpected accident or illness strikes.
Expanding Early Retirement Sector
A survey by the Employee Benefit Research Institute found that nearly 50% of early retirees are forced into retirement due to a changing workforce, health issues or a variety of other reasons like caring for grandchildren. For individuals who do not yet qualify for Medicare, but have too much household income to qualify for an Obamacare subsidy, short term health insurance can provide a new option that is friendly to budget-conscious, not-quite-yet-senior-citizens.
Booming Economy With Low Unemployment
The unemployment rate across the nation is at an all-time low due to the recent economic upturn. Whether myth or fact, it has been estimated millennials will change jobs four times over the first decade they are out of college compared to the two times their Gen X predecessors changed careers in the first 10 years after college. Jobs are plentiful and reaching for that dream career is possible now versus when Gen Xers were hunting during a recession. Short term health insurance can be a semi-permanent solution until a more permanent health insurance resource is available. Many times a temporary health plan helps bridge the gap for workers who are between jobs or stuck in a new employers 60- or 90-day waiting period before health coverage begins. To ensure coverage for doctor visits or sudden hospitalization, short term insurance fits the bill for workers in flux at approximately 50% less than traditional health insurance.
College Students Who Need Health Insurance in State of Residence
College students are allowed to stay on their parent’s health insurance plan until the age of 26, but not all insurance companies will cover students attending college out-of-state. A short term health plan is a quick and easy solution for the months a student is away at school. However, check with the college or university before purchasing short term medical for your student. Some colleges require students to carry major medical coverage with essential benefits as mandated by the Affordable Care Act (ACA).
All-Around Popularity of Short Term Health Insurance
A new report by eHealthInsurance that outlines its 2017 short term health insurance sales demonstrates that short term plans are not only popular, but a force to reckon with. The report reveals that while 61 percent of individuals purchasing a short term health plan are looking for temporary insurance coverage, 27 percent of purchasers bought short term insurance for its affordability over other health insurance plans in the marketplace. In addition, short term health applications jumped 10 percent last year, from 47 percent in 2016 to 57 percent in 2017.
As short term health insurance plans become more of a trend in the health insurance arena due to access and affordability, it’s important to understand the details surrounding short term health plans and how consumers can get the most out of their coverage.
Short Term Health Insurance Is Structured With Deductibles and Coinsurance Like Other Types of Health Insurance
A short term health plan has a medical deductible and coinsurance just like major medical insurance. Some plans also include doctor copays and prescription drug coverage – but not all. If specific coverages are important to you, look at the plan details to determine what might be the best fit for your health care needs. Paying a little bit more for better coverage could be a financial win overall if you plan to see a physician or visit Urgent Care during the duration of your policy.
Short Term Health Plans Can Be Purchased for More Than 90 Days
By the middle of 2018, the Trump administration overturned the 90-day limitation on short term health plans, which was an Obama-era rule. Health and Human Services (HHS) Secretary Alex Azar said about the proposal, “Americans need more choices in health insurance so they can find coverage that meets their needs. The status quo is failing too many Americans who face skyrocketing costs and fewer and fewer choices. The Trump administration is taking action so individuals and families have access to quality, affordable healthcare that works for them.”
Today individuals can purchase short term health insurance for as little as 30-days and up to 364-days, depending on your state of residence. In a handful of states, coverage durations cannot last more than 180-days, while in other states you can renew your 364-day short term plan for up to three years consecutively.
Short Term Health Plans Can Have a Doctor Network – Or Not
If seeing your personal physician is extremely important to you, check the network. Some short term health plans have PPO networks. Others plans allow you to see any physician and reimburse the provider on a standardized Medicare reimbursement scale. You can find out what network a plan uses (or doesn’t use) by calling the plan’s customer service line. If your provider isn’t familiar with the Medicare reimbursement scale, they can also contact the claims administrator for the short term plan to learn more.
Short Term Health Insurance is Penalty-Free After January 1, 2019
At press time, short term health plans do not meet the standards and essential mandate of the ACA, meaning, they are subject to a tax penalty. However, if you need temporary coverage for 90-days or less, short term plans are exempt from a penalty during the initial 90-day window of coverage.
If buying an ACA plan would cost more than 8.16% of your total household income, you are also exempt from the penalty. There are also “hardship exemptions” that may allow you to skip paying the tax penalty.
In October 2017 President Trump signed an executive order to remove the tax penalty, which goes into effect after December 31, 2018. Anyone who remains uninsured or purchases a short term plan for more than 90-days in 2018 is subject to the tax penalty on their 2018 federal income taxes. But there will be no tax penalty after January 1, 2019.
Free 10-Day Look Period
Not quite sure a short term medical insurance is for you? Many insurance carriers offer a free 10-day look period. If you purchase coverage and do not file a claim, some companies will return 100% of your first month’s premium and any administrative fees. Look for a 10-day free look guarantee or call the customer service line to find out more about the plan’s cancellation policy.
There are many reasons why short term health can be much more than just a temporary insurance solution. While not for everyone, short term medical plans fit many different life scenarios like a set employer waiting period, early retirement, attending a college out of state, divorce and more. Life moves quickly, and a fixed, permanent solution isn’t always the best answer for an ever-changing lifestyle.
Learn more about Pivot Health short term health plans today!