What You Need to Know about Short-Term Health Insurance
Short-term health insurance plans provide coverage for periods of less than a year. This type of coverage has been utilized by individuals who need coverage between jobs or health exchange enrollment periods.
Typically these plans provide basic coverage in the event of an accident or emergency, excluding pre-existing conditions and preventative care. Deductibles and out-of-pocket maximums can be high, but premiums are usually low. For this reason, short-term health insurance plans are attractive options for healthy individuals looking for catastrophic coverage only.
Under the Affordable Care Act
Lack of coverage for preventative care and pre-existing conditions means short-term health insurance does not meet the Affordable Care Act (ACA) minimum requirements for qualified health insurance. Therefore, people who utilize this type of coverage are still subject to penalties.
Even combined with the penalties, the low premiums offered by these plans make them a less expensive option for healthy individuals who do not require consistent care or medication. The thing is, to achieve cost balance in the marketplace, there must be healthy people covered to offset the people with pre-existing conditions like cancer and diabetes. If a disproportionate number of healthy individuals choose not to utilize the healthcare marketplace, overall health care costs will increase. In order to avoid this destabilization, a rule has been enacted that limits short-term coverage to three months and makes it non-renewable.
Factors to Consider
Because the state of healthcare is in flux, there are a few factors you should keep in mind when considering whether short-term health insurance is a good option for you and your family:
- Your coverage doesn’t follow the ACA rules. Many short-term plans exclude pre-existing conditions, preventative care, and prescription costs. Therefore, you are paying for coverage only if something catastrophic happens. All other costs are out of pocket.
- Your coverage can end. If you’re diagnosed with an illness and undergo treatment while covered under a short-term policy, the treatment may outlast your insurance policy. If you attempt to renew or enroll in another short-term policy, you will likely be denied coverage for this now pre-existing condition.
- Your future coverage needs may change. If policies change under the new administration, short-term coverage may not count as creditable. If pre-existing condition regulations change, you may be subjected to an exclusion or waiting period prior to eligibility.