The annual open enrollment period for individual major medical plans is underway in every state, and many people are trying to find the best health insurance they can afford for the year to come.
Under the Affordable Care Act (ACA), major medical plans offer many people access to coverage within their budget, but that’s not always the case for those who don’t qualify for financial subsidies. When the ACA’s premium tax credits and cost-sharing reductions are out of reach, short term medical plans can offer an alternative while you figure out your next steps to a more permanent coverage solution. (But if you do qualify for a subsidy to reduce your monthly premium, an ACA plan could be your best option.)
There are many reasons someone might choose the best short term health insurance plan for them during or outside of the annual ACA open enrollment period. For starters, it tends to be an affordable option for many people who don’t qualify for ACA subsidies. It’s also quickly obtained year-round along and offers many other advantages.
What is short term health insurance?
Short term health insurance, which is also known as temporary health insurance, provides affordable coverage to individuals and families who are between major medical insurance policies.
While major medical and short term medical plans may serve a similar function (providing benefits to help lessen what you out of pocket for healthcare), they are quite different by design.
Short term health insurance:
- Offers limited benefits for a specified coverage duration — 30 to 364 days, depending on your state’s laws and the policy you select
- Typically includes benefits to help with medical expenses resulting from an injury or unexpected illness
- Usually costs less than an unsubsidized ACA plan due to its limited nature
- Is not guaranteed issue, which means you can be denied coverage based on your health history
- May not cover pre-existing conditions
- Doesn’t qualify for ACA subsidies
Major medical insurance (aka ACA plans, Obamacare plans):
- Offers full coverage for the entire calendar year in every state
- Provides all of the ACA’s 10 essential health benefits, from preventive care to emergency services
- When unsubsidized, usually costs more than a short term plan due to its comprehensive nature
- Is guaranteed issue, which means you cannot be denied coverage or charged more based on your health history
- Must cover pre-existing conditions
- Qualifies for income-based subsidies when purchased through a state or federal health insurance exchange
Short term health insurance isn’t subject to the Affordable Care Act. The fact that these temporary plans are not guaranteed issue and have more streamlined benefits are the key reasons they may seem more budget-friendly to those who don’t qualify for subsidies and need affordable coverage.
Why do people buy short term plans?
If short term medical insurance offers fewer benefits and isn’t guaranteed issue, why would someone choose it over major medical insurance? There are many reasons—for starters, needing coverage outside of open enrollment and not qualifying for a special enrollment period. However, it often comes down to benefits vs. budget when affording an ACA plan and needing some form of health insurance benefits to help with unexpected medical costs
According to a recent survey by HealthCare.com, individuals who purchase short term health insurance tend to have two things in common: They’re uninsured and looking for affordable coverage.
More than half of individuals surveyed who purchased temporary health insurance (58%) were uninsured when they bought their coverage, according to survey data. Out-of-pocket costs were the No. 1 concern for survey participants, with 73% expressing concern over the high monthly cost of health insurance.
These individuals see temporary health plans as their best option for one of two main reasons:
- They don’t want to be tied down by permanent plans (38%).
- They need to fill a short gap between individual or group major medical plans (24%).
Not only were respondents concerned with monthly premiums, they also expressed concern over high deductibles (44%) and paying for medical bills out of pocket (56%).
Purchasing short term health insurance may help with these concerns as you work toward finding more permanent health insurance. In addition to premiums that feel more affordable to some, short term plans offer a range of deductible options to choose from and include benefits to help lessen what you pay out of pocket for covered medical expenses.
Short term plans are also known for their flexibility when it comes to policy length (as few as 30 days) and the tendency to be network-free so you can see a healthcare provider who is convenient to and preferred by you.
Coverage when you don’t qualify for an ACA subsidy
The decision to enroll in short term health insurance may simply be a preference for some, such as the survey respondents who said they didn’t want to be “tied down.” Others may not want to pay for benefits they won’t use—maternity, for example.
People who don’t qualify for an Obamacare subsidy are another population that might opt for short term health insurance. In the absence of premium tax credits to lower monthly payments and cost-sharing reductions to reduce out-of-pocket costs, these individuals might find health insurance and healthcare otherwise unaffordable. Short term coverage may provide them with potentially less expensive benefits that can help reduce what they pay out of pocket when they do need to see a doctor.
Temporary coverage to fill a gap
Short term health insurance policies help individuals and families secure benefits during times of transition, when they are uninsured and haven’t yet secured major medical insurance on their own or through an employer.
Life presents all sorts of situations that can lead to someone becoming uninsured. Some common circumstances that could necessitate temporary coverage include:
- Losing or quitting your job.
- Moving to a new city or state.
- Starting a new job with a waiting period before group benefits take effect.
- Turning age 26 and aging off a parent’s plan.
- Experiencing a life change such as divorce.
- Retiring before Medicare begins.
Under most of these circumstances, people with group coverage may be eligible for COBRA. However, it tends to be an option many find unaffordable. Most HealthCare.com survey respondents (80%) who lost employer coverage said they didn’t elect COBRA because it was too expensive on a monthly basis.
An ACA plan may also be an option in the circumstances listed above—they are typically qualifying life events for a special enrollment period. However, as stated before, those who don’t qualify for subsidies may be looking for another option to save money and obtain benefits that will help with unexpected healthcare while they’re between major medical plans.
If you don’t qualify for special enrollment and aren’t eligible for Medicaid in your state, then a short term health insurance policy can provide temporary benefits until you can obtain long-term coverage.
6 advantages of short term plans
In addition to affordability, short term health insurance has many other advantages that can make it seem like the best option for some.
Prescription drug coverage — Some short term health insurance plans may offer discounts on prescription medications and others may offer prescription drug insurance benefits.
Provider choice — Many short term plans don’t include a doctor network. That means you can seek care from your preferred healthcare provider.
No referral requirement — If you want to see a specialist for covered medical care, you can see a specialist. You are not required to get a referral.
Flexible coverage durations — You can choose a short term health insurance policy that lasts 30 days to 364 days, depending on your state’s laws. In some states, you may even enroll in extended coverage for multiple years with one application.
Quick coverage — You can enroll in five minutes or less. There’s minimal paperwork and processing involved. Your application will be approved or denied within moments. Coverage may begin as soon as the next day if that’s what you choose.
Streamlined enrollment — Dental and vision insurance can be included on same application, which can help save you time and effort.
Of course, a short term plan isn’t right for everyone. You may want to consider an ACA plan if you:
- Qualify for a subsidy that makes major medical insurance possible
- Have healthcare conditions that require ongoing care
- Require the full range of essential health benefits and preventive care services included with all major medical plans
- Don’t qualify for short term health insurance
- Live in a state where short term plans aren’t available
- Need coverage for a longer time duration than your state allows for short term plans
If you decide that temporary coverage is right for you, you will find that there are many plan options on the market so you can find the best short term health insurance for your situation.
Plus, you can enroll in short term health insurance year-round. There are no open or special enrollment periods. If you suddenly find yourself uninsured, you can apply for a short term policy and have an answer within minutes. If your application is approved, you can choose to begin coverage as soon as the next day.