Short Term Medical Plans vs. High Deductible Health Plans

With the open enrollment period to purchase Obamacare coverage for 2018 in its last few days, millions of Americans are researching the plan options available to them, hoping to find a policy that best meets their benefit needs and budget.

Many millions who do not qualify for subsidies may be purchasing short term health insurance rather than high deductible health plans to fulfill their needs.

About 80 percent of Obamacare enrollees make between 100 to 400 percent of the federal poverty level, qualifying them for assistance from the federal government to help pay for their coverage, in the form of premium tax credits and/or cost-sharing reduction subsidies. These enrollees will find that after federal assistance, their average premium for a silver-level plan costs about $100 per month.

But many others who are shopping on the marketplace exchange for coverage without qualifying for premium tax credits or subsidies may be in for sticker shock. The Kaiser Family Foundation reports that in the 19 states which chose not to implement the Obamacare Medicaid expansion, more than 2.5 million individuals are caught in the “Medicaid gap.”

  • These individuals have income between approximately 44 percent and 100 percent of the federal poverty level – resulting in an income too high to qualify for Medicaid, yet too low to qualify for federal assistance to pay for Obamacare coverage.
  • An additional 6.7 million individuals shopping on the Obamacare exchange will also find themselves unable to qualify for premium tax credits or subsidies because their income exceeds the federal assistance guidelines.

In all, that’s more than 9 million consumers who are facing average premium increases of 34 percent for silver-level exchange plans in 2018, with the hardest-hit markets experiencing a 78 percent increase. Rising premiums, coupled with high out-of-pocket costs for deductibles and co-pays, are pricing many consumers right out of traditional major medical benefit plans available on the Obamacare market.

Some are considering whether they should downgrade to a high deductible health plan, or if they should simply go without insurance coverage at all.

It doesn’t take an expert to tell you that forgoing insurance coverage is a risky proposition. Even if you’re a healthy individual who rarely visits your doctor, there’s always the potential of an unforeseen illness or injury, and having no insurance can jeopardize your financial security. That’s why a growing number of individuals are turning to alternative insurance solutions – such as short term health insurance – to meet their coverage needs. The premiums won’t bust your monthly budget, yet short term health insurance still provides the financial protection you need in case of a medical emergency.

Short Term Health Insurance

Short term medical plans have budget-friendly premiums, making them a cost-effective insurance solution that provides many benefits similar to those offered by major medical plans, but for a designated period of time. Short term health insurance provides benefits for typical medical provider visits, hospitalizations and surgeries.

High Deductible Health Plans

As health care costs have skyrocketed at a far faster pace than inflation and average household wages over the last few decades, this type of health insurance plan has grown increasingly popular with both employers and individuals. High deductible health plans shift how you pay for your health care costs by charging you lower monthly premiums but expecting you to pay for a greater proportion of your medical services costs.

Plan Comparison

The following chart provides a high-level overview of short term health insurance and Obamacare high deductible health plans to help you determine which option might offer you the benefits you want and need, at a cost that fits your budget.

Features High Deductible Health Plan Short Term Medical Plan
Premiums Low Low
Deductibles
The amount you must meet before your plan will pay benefits for covered services.
2018 average deductible:

  • Individual: $5,861 (Bronze); $4,033 (Silver)
  • Family: $12,186 (Bronze); $8,292 (Silver)
Short term medical plans enable you to choose from a range of deductible amounts from $1,000-$10,000.
Preventive Care Obamacare plans pay for qualified preventive services without having to meet the deductible. Some plans have a copay for doctor office without having to meet the deductible.
Out-of-Pocket Maximum 2018 limit for Obamacare plans:

  • $7,350/individual
  • $14,700/family

After you have reached your out-of-pocket maximum, the plan will pay qualified medical expenses for the remainder of the year. Plans have an embedded individual out-of-pocket maximum.

This amount may vary depending on the plan you select but individual coinsurance maximum does not exceed $10,000.After you have reached your out-of-pocket coinsurance maximum, the plan will pay qualified medical expenses up to your maximum benefit limit per coverage period.
Maximum Benefits Obamacare plans do not limit the amount of benefits paid towards covered services while you are enrolled. Plan amounts vary; there is usually a maximum amount per coverage period, such as $1 million.
Pre-Existing Conditions Health insurance companies who provide Obamacare-compliant plans may not refuse to cover you or charge you a higher premium if you have a pre-existing condition (a health issue that you had before your coverage began). Insurers also can’t refuse to cover treatment costs for covered expenses for your pre-existing condition, nor can they limit benefits for that condition. When you apply for a short term medical policy, you’ll complete a brief health history; typically, coverage is not provided for services related to pre-existing conditions. This “health screening” process helps keep short term health insurance premium rates very low, making it particularly attractive coverage for young, healthy individuals.
Essential Benefits Obamacare-compliant plans are required to provide essential benefits, which fall into 10 different categories. Not all of these benefits are provided by a short term medical plan, so be sure to review policy details before making the purchase decision.
Duration of Coverage If you pay your monthly premiums, you only need to enroll in an Obamacare plan on an annual basis. Currently with Pivot Care you can purchase in 30 day intervals or four 90-day back-to-back certificates that provide nearly a year of coverage. However, a newly-signed executive order proposes that short term medical plans may offer coverage that lasts for up to one year (probably effective 2019).
Provider Networks Most Obamacare plans have restrictive provider networks which pay benefits differently for “in-network” providers versus “out-of-network” providers. Short term medical plans through Pivot Care have no provider networks, so you may visit any health care provider you want.
Coverage Start/End Dates Obamacare’s restrictive enrollment guidelines require you to sign up for coverage during the annual open enrollment period (November 1 – December 15). Your coverage is effective January 1 of the following year.To enroll at any other time, you must experience a “qualifying life event” during the year, such as a birth, marriage, death, etc. You must enroll in an Obamacare plan within 60 days of the event occurring, or you will need to wait for the next annual open enrollment period to sign up for coverage. Enrolling in short term medical coverage is typically a very convenient, simple process. Many insurance companies have the flexibility to start your short term health insurance coverage anywhere from 24 hours up to 60 days after applying. You usually may cancel your coverage at any time, with no penalty, and some insurers even offer a 10-day “free look” period. Should you purchase a plan and cancel within the first 10 days – and you haven’t filed any claims – you’ll most likely receive a full refund of your premium and fees.
Health Savings Accounts Some high deductible health plans may be paired with a health savings account (HSA), which lets you save pre-tax dollars in an investment account to pay for qualified medical expenses (not deductibles, co-pays or coinsurance). Note: Obamacare plans which have higher maximum out-of-pocket limits than allowed by HSA-qualified plans may not be paired with an HSA. You may not pair a short term medical plan with an HSA.
Obamacare Individual Mandate Obamacare-compliant high deductible health plans satisfy the individual mandate clause, so you do not need to pay a penalty. Short term health plans do not qualify as Obamacare plans, but the Trump administration eliminated the individual mandate penalty.
Non-Insurance Benefits Not applicable. Pivot Health’s short term medical plans offer prescription and optical discounts, and other non-insurance benefits.

*Pricing based on Pivot Health short term health plans.

Which Plan is Better for Me?

Deciding which type of plan to purchase will depend on factors such as your budget, the length of time you’ll need coverage, and your general health condition. Of course, life is uncertain and there is always the possibility an illness or injury could occur.

Let’s look at how the different plans could work for a single adult who needs medical services.

  • Matt Jones is 28 and living in Chicago
  • He earns $56,000 per year, so does not qualify for either premium tax credits or subsidies
  • Matt lives a healthy, active lifestyle and does not use tobacco

When shopping for health insurance coverage, Matt compares two insurance solutions:

High Deductible Health Plan Short Term Medical (Pivot Health)
Monthly Premium $285 $119.93
Deductible $6,000/individual $2,000/individual
Coinsurance 40% 20%
Out-of-pocket maximum $7,350 $7,000

When Matt’s ruptured appendix lands him in the hospital for emergency surgery, the cost of his medical services totals approximately $10,794. Depending on which plan he chooses, Matt’s out-of-pocket costs will differ significantly. Let’s see how:

Matt’s Ruptured Appendix
(Total claims cost of $10,794 for services such as emergency room visit, surgery, hospitalization and care)
With a high deductible health plan With a short term medical plan
Deductible $6,000 Deductible $2,000
Coinsurance
(40% until out-of-pocket maximum reached)
$1,350 Coinsurance
(20% until out-of-pocket maximum reached)
$1,759
Plan pays $3,444 Plan pays $7,035
Matt’s out-of-pocket costs: $7,350 Matt’s out-of-pocket costs: $3,759

In this example, Matt pays a lower monthly premium for short term medical coverage than he would for a high deductible health plan, saving $1,980 in a year. In the example above, he also saved $4,191 on his out-of-pocket costs for medical services.

Short Term Medical Provides Affordable Coverage While the Future of Obamacare is Determined

It’s difficult to predict what will happen to Obamacare legislation. Although Republicans have been unable to pass either repeal or reform legislation through both the House of Representatives and the Senate, it’s probable that they will eventually try again with new legislation. In the meantime, the Trump administration has acted to hasten what it considers the inevitable demise of Obamacare, which has experienced a significant rate of departures from the exchange by participating insurers, as well as soaring plan premiums and out-of-pocket costs.

Until Washington takes definitive action and resolves the uncertainty over Obamacare’s future, alternative insurance options such as short term medical provide you an easy and affordable coverage solution.