In 2016, 28.1 million Americans were uninsured for the entire year. However, with recent changes to the healthcare mandate, that number may rise, particularly since premiums are largely going up.
The most popular plans available through the Affordable Care Act (ACA), also known as Obamacare, saw premiums soar by an average of 34 percent in 2018. In 2019, Californians can expect their cost to rise by almost 9 percent. In Washington State, insurers are proposing a 19 increase on average. The CareFirst of Maryland’s Blue Preferred offering may raise rates by a stunning 91.4 percent.
Now that Obamacare is changing, many people will begin to explore alternatives, one of them being short-term medical insurance. However, many wonder if short-term health insurance is worth the cost and if it provides enough coverage to be an effective option.
What is Short-Term Health Insurance
Short-term health insurance plans are products that typically come with a much lower cost in comparison to traditional options. For example, according to a report in late 2017, for a 55-year-old male in Indianapolis, the cheapest ACA plan was $563 a month. How much was a short-term health insurance plan? $103 each month.
However, they also come with a big caveat; the coverage typically only lasts for 90 days at a time.
It is important to note that the US Department of Health & Human Service is asking for the removal of the 90-day plan length limit. Ideally, they want coverage to last up to 364 days, just one day shy of a year. But, that isn’t the current state of the limitation, and there’s no guarantee the change will go through.
Further, some insurers allow people to buy up to four 90-day periods at a time. This means completing only one application and going through a single underwriting process. Then, the plans are valid sequentially, providing 360 days of coverage.
While you might be able to secure close to a year of insurance, it usually isn’t the kind of coverage you would be hoping to find. Mainly, this is because these plans don’t meet ACA standards.
Since they don’t meet ACA standards, they insurer can use higher deductibles, lower caps, and additional restrictions on a variety of medical treatments. This makes the monthly cost low, but that doesn’t mean you won’t pay big if you use the coverage.
Is Short-Term Medical Insurance Worth the Cost?
Even with a short-term medical insurance plan, a person could still be left with massive medical bills. Largely, these options don’t provide a substantial amount of coverage and have numerous limitations.
For example, the plan might not include prescription drug or maternity coverage or could charge extra to add these features. Excluding pre-existing conditions (which includes anything you’ve received treatment for or experienced symptoms of in the last five years before securing the plan) is also common.
Some insurers will even limit or deny treatments if a person discovers a severe condition, like cancer, within 30 days of the policy starting.
Additionally, a serious illness after the policy starts may lead the insurer to refuse to renew your plan later. This means, after the 90 days, you may not have any coverage options with them.
Traditionally, short-term health insurance also comes with deductibles that are higher than the maximums set in the ACA. That $103 a month plan mentioned above has a $5,000 deductible. This means you’d have to spend $5,000 in medical costs before the plan even kicks in.
After that $5,000, the plan only covers 50 percent of a person’s medical bills, in the majority of cases, until you spend an additional $5,000 in out of pocket expenses. Plus, there are still other limits and caps to contend with, like a $500 cap on ER visits.
ACA-compliant plans adhere to specific guidelines, including coverage for pre-existing conditions and more favorable out-of-pocket maximums. Plus, they can’t have as many exclusions as a short-term medical insurance plan, making your coverage more comprehensive.
Should You Try a Short-Term Health Insurance Plan?
Ultimately, your unique situation will determine whether a short-term medical plan is right for you. However, it is crucial that you read the fine print to learn about the coverage, exclusions, deductibles, and caveats before you make that decision.
Additionally, it’s important to note that not all states allow short-term plans. People in Massachusetts, New Jersey, New York, Rhode Island, and Vermont can’t purchase these forms of coverage at all. Specific states may also restrict each renewal period further, making them last less than three months.
In the vast majority of cases, short-term health insurance isn’t a cost-effective option. However, some plans are better than others. You may find one with lower deductibles, fewer restrictions, and favorable out-of-pocket limits. Typically, these will cost more than less comprehensive plans, but they can help avoid financial ruin at a much lower price tag.
When in doubt, consult with a state-licensed broker if your state-run exchange has them. These professionals can help you assess your options and determine which one fits your financial situation while respecting your personal healthcare needs.
However, if an ACA plan is available, even if the monthly cost is higher, you could be better off with the insurance. A single medical event can be catastrophic financially, and ACA-compliant plans provide substantially better protection.
Have you ever used short-term medical insurance? Tell us about your experience in the comments below.
Looking for more great insurance articles? Here are a few to get you started:
- 5 Tips to Save Money on Health Insurance
- Medical Calamities Can Strike Anytime: Get Insured for a Secure Future
- What to Do When Insurance Won’t Cover All of Your Meds
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