Fifteen states — Colorado, Idaho, Indiana, Kansas, Louisiana, Maine, Maryland, Michigan, Minnesota, Montana, Nevada, New Mexico, Ohio, Oregon, and Wyoming — have a 6-month maximum coverage period for short term health insurance plans. The remaining states have a maximum coverage period of one year.
If you are an individual in generally good health looking for an affordable way to get health insurance coverage for a limited amount of time, you should consider purchasing a short term plan.
Eligibility Requirements for Short-Term Health Insurance
Since short term insurance plans are sold by insurance companies in the private market and not held to the same standards as long term health insurance, providers can use their discretion when awarding and renewing short term health coverage. Although insurance companies have the option of extending short term health coverage to anyone, the guidelines below are standard practice when screening applicants.
Short term health coverage is not often extended to Individuals who:
- Have a pre-existing medical condition (e.g. diabetes, cancer, heart disease or emphysema)
- Are pregnant
- Are severely overweight (men over 300 pounds, women over 250 pounds)
- Have been diagnosed with or have been treated for AIDS or HIV
- Are eligible for Medicaid
- Are covered by another health insurance plan
- Are not a U.S. citizen or legal resident
If you have a pre-existing condition, the insurance company may approve coverage if you’ve been symptom free for at least 3 to 5 years. Some providers may extend limited coverage that does not include care for issues related to a pre-existing condition.
Since short term health insurance is designed to work in short periods, coverage begins very quickly, often within 24 hours of applying.
Short term health insurance offers low premiums, which makes it an attractive option for coverage. Generally, a short term health insurance plan costs 50% less than traditional health coverage. However, these low premiums often come with limited coverage and high deductibles.
For example, the cost for a short term health insurance plan for a 30-year-old male from living in California can be as low as $100 a month for a 6-month plan with a $5000 deductible. Under the Affordable Care Act, the least expensive plan for this individual is roughly $175 a month with a $5,000 deductible.
Unlike long term plans, individuals can enroll in short term health insurance plans at any time. If you’ve missed an open enrollment period or are without coverage for any reason, short term health plans are available to close the gap in coverage before a long term plan is in place.
Short term health insurance can offer a low-cost option to continue coverage during certain periods when long term coverage isn’t available. If you are considering purchasing a short term health insurance plan, it’s important to know the differences between this coverage and the long term coverage you may be used to.
In general, short term health insurance only covers major illnesses and accidents. This differs from most long term plans that provide comprehensive care including physicals, checkups, immunizations and preventative care. Basically, short term health insurance is designed to cover serious, unforeseeable events and emergencies, rather than total care. The following are not usually covered by short term health insurance plans:
- Preventative care
- Maternity leave
- Prescription drugs
Short term plans lack much of the protection found under long term plans. Most short terms plans do not cover pre-existing conditions and you will likely be denied coverage if you have one. If you fail to report a pre-existing condition, coverage can be denied if you get sick while covered by a short term plan.
Short term insurance providers reserve the right to deny coverage based on non-health related reasons and short term insurance providers are not required to renew your plan when it expires. This means that if you make a claim while covered by a short term health insurance plan, you are not likely to be offered continued coverage when the plan is up.
There are many other instances when individuals may experience a gap in health insurance coverage, such as a recent college graduate, person who moves, or dependent who has aged out of being covered by a parent’s plan. Most of these cases are considered “major life events” and allow for special enrollment outside of the standard enrollment period. Enrolling in a long term health plans is usually the better choice since they offer superior coverage. However, there are many gap situations when this type of coverage is not available and short term health insurance can come in handy. Short term coverage is often a good option for people:
Between insurance plans
Transitioning between long term insurance plans can take time. Transitioning or enrolling in a federal (Medicare) or employer plan may result in a gap in coverage that can be filled by a short term health insurance plan. Since short term plans offer quick application and beginning of coverage, individuals between long term plans may use a short term plan to fill in that gap.
A lapse in coverage often occurs when individuals transition from one job to the next. For example, employee benefits may not kick in until after their probation period ends, leaving a gap in coverage. A short term health insurance plan might be right for you if you want to remain covered during a transition like this.
Who missed open enrollment
If you missed the open enrollment period for health insurance under the Affordable Care Act or another insurance provider, you may consider a short term health insurance plan to get coverage before you can enroll in a long term plan. Individuals who have denied coverage, but decide later they would like some, may consider short term insurance between enrollment periods.
Exempt from enrolling under Affordable Care Act and do not qualify for or Medicaid
Depending on your income, you may be exempt from enrolling in health insurance under the Affordable Care Act and also not qualify for Medicaid. In this case, you will not be faced with a penalty fee for not enrolling in a plan, but you will not have health coverage. Short term health insurance plans are an affordable option for individuals who find themselves without coverage in this type of situation.
Who need proof of insurance
Since coverage can begin within 24 hours, individuals needing to show proof of insurance may choose a short term plan to fulfill this requirement as soon as possible.
If you are planning a trip outside of your long term health plans’ coverage network, you may consider investing in a supplemental short term plan so you’re covered for unexpected incidences that may happen during travel.
Benefits of Short Term Health Insurance
As with long term plans, short term health insurance plans vary greatly by provider. Many providers offer multiple packages to meet your needs and budget. Coverage reflects the nature of the plan — limited and less robust than lone term plans. Depending on the plan you choose, coverage might include inpatient/outpatient care, emergency room visits, intensive care, ambulatory services, surgical care and more. For most plans, maximum coverage cost ranges between $1 and $2 million. These types of plans do not often limit how much the insured person can pay out of pocket.
Purchasing a Plan
Short term health insurance plans are sold in the private market. If you’ve had long term coverage in the past, you may want to begin your search with your previous provider since many insurance companies provide a variety of coverage options. Many websites offer quotes from a database of providers to help those shopping for insurance choose a plan at the best price.
The insurance provider can help you identify the coverage package that works best for you and your family. To help identify the short term health insurance plan best for you, you should ask your provider about the things most important to you in your coverage. Some examples might be:
- Am I free to visit any doctor, hospital or pharmacy I want?
- How much is my deductible?
- Is there a co-pay?
- Is there a maximum for the out-of-pocket expenses I’ll be responsible for?
- Does the plan cover visits to a specialist?
You should also be prepared to share information, such as age, gender and date of birth, for each family member you’d like to cover. You will also be asked basic health screening questions such as “Are you a smoker?” Questions about pre-existing conditions will also need to be answered.
Most providers allow you to choose between a monthly payment plan or an upfront coverage payment. Choose the option that works best for your financial situation.
Affordable Care Act
Before the Affordable Care Act, short term health insurance plans were a great option for individuals without health insurance who could not afford full coverage on their own. Now, individuals who refuse coverage are charged a penalty fee for not having insurance. In 2016, the fee is 2.5% of an individual’s gross adjusted income or $695, whichever is greater. Individuals must prove they have adequate health insurance coverage, or “minimum essential coverage,” to avoid this fee. Minimum essential coverage is usually met when an individual is covered by their employee or enrolled under the Affordable Care Act. It is not met, however, by short term health insurance.
This fact does not undermine the value of short term health insurance, which is a great option in a variety of situations — for people between jobs, who missed open enrollment, or who do not earn enough to be charged a fee for not having coverage. It does mean, however, that you cannot use short term health insurance coverage to avoid enrolling in a long term health plan. Even with short term health coverage, you will still be required to pay the monthly fee for not having health insurance.
Another important thing to note is that the end of a short term health plan is not considered as one of the special circumstances that permit special enrollment. If your short term health insurance coverage ends outside of an open enrollment period, you are required to wait until the enrollment period opens before getting coverage under Obama Care.
The Consolidated Omnibus Budget Reconciliation Act (COBRA) offers continuation coverage for individuals in certain situations. Gaps generally covered by COBRA include:
- Quitting or losing a job
- Reduction in hours leading to a reduction in benefits
- Job transition
- Loss of status as dependent child
- Other life events
Those who are eligible may be required to pay their entire insurance premium to keep their plan during the extended coverage period, which means that although COBRA allows individuals to continue their complete coverage, it can be costly. If you are in a position to choose between COBRA and a short term health plan, the pros and cons of each should be considered based on your health and financial situation.
Health Insurance Portability and Accountability Act (HIPPA) plans are special insurance plans that cover individuals with pre-existing conditions who are not eligible for other insurance plans. Enrolling in a short term health insurance plan, though not likely possible if you qualify for HIPPA, will make you ineligible for a HIPPA plan in most states.