Short-term health plans offer a temporary coverage option when transitioning between comprehensive policies or desiring stopgap insurance. However, the lower monthly premiums of short-term plans come with many drawbacks like capped payouts, exclusions of pre-existing conditions, benefit limits, and lack of standard consumer protections. This guide examines how short-term plans work, limitations to understand, tips for avoiding pitfalls, and when alternatives like Affordable Care Act plans may prove wiser.
What are Short-Term Health Insurance Plans?
Definition and basic traits:
- Provides temporary basic health benefits from private insurers, lasting less than 12 months.
- Originally designed to bridge gaps in coverage for a month or two when transitioning policies. Now can extend up to 3 years in some states.
- Not considered minimum essential coverage under the ACA – does not satisfy individual mandate.
- Enrollment often fast and easy with limited medical underwriting or screening.
- Much lower premiums than ACA plans but huge coverage gaps and caps.
Understand restrictions before relying on short-term plans for primary coverage needs.
Also, Check this as well Catastrophic Health Insurance
Why Consider Short-Term Insurance Plans?
Reasons some elect temporary coverage:
Lower Premium Costs
- Monthly premium rates often significantly cheaper than alternatives.
Bridging a Coverage Gap
- Provides some basic benefits for 1-3 month gap between school or job coverage.
Supplemental Stopgap
- Extra protection alongside high-deductible primary catastrophic policy.
Temporary Residents
- Non-citizens living in US short term unable to enroll in public exchange plans.
Missed Enrollment Deadlines
- Ability to quickly gain basic coverage if public plan enrollment lapsed.
Affordability Challenges
- Self-employed or gig workers struggling to pay high exchange premiums even with subsidies.
Understand that short-term plan benefits come with big trade-offs versus comprehensive coverage.
Limitations and Exclusions of Short-Term Medical Insurance
Key coverage gaps:
- No coverage for pre-existing conditions. Those with pre-exisitng illnesses uninsurable.
- No required essential health benefits like mental health services, prescription drugs, maternity.
- Strict dollar limits on amount insurer will pay over course of plan term. Once hit, no more covered.
- No out-of-pocket maximum – you pay all costs beyond plan limits forever.
- No subsidies or premium tax credits available to help pay monthly costs.
- Not guaranteed renewable – insurer can refuse to renew coverage after term expires. No protections if health declines.
Shortfalls require carefully weighing if such limited plans fit your coverage needs.
Assessing Your Needs When Considering Short-Term Health Insurance
Important considerations before enrollment:
- Do you have any existing or past health conditions that would be excluded?
- How much can you afford comfortably to pay out-of-pocket if unexpected illness or serious medical event occurred?
- Will you need coverage for medications, mental health, or other essential benefits not included?
- Are you pursuing short-term coverage mainly to have some type of affordable plan or because it fits your temporary situation?
- Are other insurance options like employer coverage, Medicaid, or full ACA marketplace plan absolutely unworkable?
Having clarity on the “why” helps determine if shortfalls matter given your circumstances and alternatives.
Comparing Short Term Insurance Plan Limitations to ACA Plans
How capped coverage compares:
Pricing
Short-term premiums cheaper but no premium tax credit eligibility.
Pre-existing Conditions
ACA plans must cover. Short-term plans often exclude.
Essential Benefit Services
ACA plans include them. Short-term does not require.
Out-of-Pocket Maximum
ACA caps total you could owe. No limit with short-term.
Renewability
ACA plans renewable. Short-term insurer choice.
Understand how potential catastrophic gaps differ before choosing limited benefits.
Analyzing Short Term Health Plan Exclusions
Services typically not included:
- Pre-existing conditions – Often excludes pre-existing conditions completely.
- Prescription medications – Provides no prescription drug coverage. Must pay 100% out-of-pocket.
- Routine care – Well visits, vaccinations, cancer screenings not covered.
- Maternity and newborn care – Not covered for pregnancy, delivery costs.
- Mental health services – No coverage for therapy, addiction treatment, etc.
- Chronic disease management – Provides no benefits for ongoing treatments and drugs.
Review fine print to ensure critical services are not omitted given your health profile.
Understanding Caps That Limit Short Term Plan Benefits
Maximums that constrain coverage:
Policy Term Limits
- Designed for temporary coverage periods ranging from 30 days to 3 years depending on state.
Annual/Lifetime Benefit Maximums
- Cap total dollar amount the policy pays toward your care during the policy term. Once exceeded, you pay for all other services that year. Often $1 million limit.
Daily/Visit Caps
- Limit amount covered per inpatient hospital day or per outpatient visit – as little as $500 in some cases.
Caps require self-paying significant costs of serious treatments once reached.
Shopping for Short Term Medical Insurance Providers
Where to find plans:
Public Exchanges
- Not sold on Healthcare.gov but some state exchanges like CoveredCA offer tailored short-term options.
Direct to Consumer
- Insurers like UnitedHealthcare sell directly online without brokers.
Private Marketplaces
- Sites like eHealthInsurance allow researching and comparing short-term plan options by cost and benefits.
Agents
- Local insurance brokers simplify researching plans and policy differences. Provide enrollment support.
Carefully vet insurers and policies when evaluating this complex insurance product category.
Understanding Short Term Plan Premiums and Costs
Factors impacting monthly and overall costs:
- Plan duration – longer terms of 2-3 years come with higher premiums than 30-90 days.
- Deductible amount – plans with higher deductibles before coverage offer lower premiums.
- Age – older enrollees pay more in premiums due to higher expected costs.
- Pre-existing conditions – applicants with health issues may be charged more or denied.
- Coverage caps – lower caps can reduce premiums further but increase financial exposure if hit.
Cheaper monthly premiums exchange for less comprehensive coverage and more out-of-pocket risk.
Avoiding Short Term Health Insurance Scams
How to identify fraudulent plans:
- Claims of extremely low premiums at a fraction of unsubsidized ACA exchange plans should raise red flags. If it seems too good to be true, it probably is.
- Avoid “insurers” with no online presence or information on history, executive leadership, and financials.
- Reject high-pressure sales tactics pushing immediate enrollment commitment without opportunity to review full policy details.
- Verify the insurer holds an active license and certificate of authority to sell policies in your state.
- Carefully document and save all correspondence in case legal escalation needed.
The right plan provides coverage security. The wrong one leaves your finances dangerously exposed.
Alternatives to Short Term Medical Insurance Plans
Additional options beyond limited duration:
Marketplace Catastrophic Plans – Very affordable high deductible plans available to those under 30 or with hardship exemption.
Medicaid Managed Care – Covers those meeting low income thresholds with more robust benefits.
Individual Major Medical – ACA-compliant plans with all essential benefits and required protections – may qualify for premium tax credits.
Group Plans – Leverage group rates and premium contributions through employer, union, association, or other aggregator.
State High Risk Pools – State-run programs provide subsidized coverage with more protections for those with chronic pre-existing conditions in many states.
Depending on circumstances, these alternatives balance costs and minimum needed benefits.
For those in good health requiring only temporary stopgap protection, short-term health policies offer a product to fill that niche. But for comprehensive medical coverage, ACA marketplace plans provide significantly better access to affordable care that cannot exclude pre-existing conditions. Spend time fully understanding limitations and evaluating alternatives before committing to short-term coverage spanning years. Skimpy health insurance proves far more costly than the monthly premium when illness strikes unexpectedly.