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The Pros & Cons of Different Types of Health Insurance

The Pros & Cons of Different Types of Health Insurance

Below is a quick outline of some of the pros and cons associated with three types of major medical insurance — short term health insurance, Affordable Care Act insurance (a.k.a. Obamacare), and employer-provided health insurance all of which are creditable coverage in accordance with HIPAA. In addition, Health Benefit Plans, while not major medical insurance, are a popular product that enhances major medical insurance.

Short Term Health Insurance

  • Very affordable premiums that can cost half of what is charged for an Affordable Care Act health plan
  • Premium savings can be used to buy other care such as dental or vision coverage
  • Typically has broad network of healthcare providers and is accepted at many of the top hospitals and cancer centers in the U.S.
  • Applications for insurance can be made any time during the year
  • No coverage of pre-existing medical conditions
  • Health status and pre-existing conditions evaluated as part of application approval process; applicants can be rejected
  • Prescription drugs may not be covered (or have significantly restricted coverage)
  • Some benefits not covered (e.g. maternity coverage is excluded)
  • Plan is limited to a term of less than 90 days; in most states members can reapply for additional plans
  • Enrollees still subject to Affordable Care Act Shared Responsibility Tax

Affordable Care Act Insurance (Obamacare)

  • Broad array of health insurance benefits
  • Some people qualify for premium & out-of-pocket costs subsidies
  • No review of health status or pre-existing conditions during application process; applicants will not be rejected based on their health
  • Broad coverage of many generic, brand name, and specialty drugs
  • Includes health insurance benefits you may not want
  • Often expensive without premium subsidies
  • Very high deductibles
  • Many plans limit enrollees to a narrow network of healthcare providers
  • In many geographic areas, especially rural counties, Obamacare includes only one insurer
  • Cannot enroll in plan outside of annual enrollment period without a qualifying life event (e.g. moving to a new region)

Employer-Based Insurance

  • Often has a broad array of health insurance benefits
  • Lower premiums are available due to significant subsidization from employer
  • Employer premium subsidies not treated as taxable benefits for employee
  • The maximum length of time coverage can be denied for a pre-existing condition is 12 months
  • Coverage discontinues after the enrollee discontinues work at the employer — Can exercise the COBRA option to continue coverage but it is very expensive
  • Health insurance choices limited to selection approved by employer
  • Small employers often subsidize health insurance at a lower level than large employers

Health Benefits Plans

  • Not health insurance-- a benefit plan that, gives a member a cash payment upon a qualifying incident (e.g. accident or critical illness)
  • Very helpful when a member needs help paying medical bills not covered by insurance
  • Extremely affordable Some plans include additional wellness benefits such as telemedicine so members have access to doctor consultations via phone or online video chat 24/7 at no additional cost
  • Applications for insurance can be made any time during the year
  • Prescription discounts often included
  • Most plans do not require medical underwriting so, in general, applications will not rejected based on health status
  • Supplements major medical insurance
  • No coverage of pre-existing medical conditions
  • Benefits are tied to specific incidences such as critical illness or an accident; no benefits for general illnesses (e.g. doctor’s visits for the flu, diabetes) or conditions such as pregnancy
  • Approval
  • Capped medical expense coverage at a rate much lower than major medical plans
  • Enrollees still subject to Affordable Care Act Shared Responsibility Tax if they do not have Obamacare/Affordable Care Act compliant insurance

AFFORDABLE CARE ACT TAX. Short Term health insurance is health insurance outside of the Affordable Care Act ("Obamacare"). It does not include all ten of the minimum essential benefits of Obamacare and it does not cover pre-existing conditions. To learn more about the tax, its exemptions, and how to calculate the affordability of short term health with the tax, see here. To learn more about the differences between Short Term health insurance and Obamacare, see here.