What Is Short Term Health Insurance?
Short Term health insurance (or Term Health Insurance) is medical insurance designed to provide coverage during the gaps between other health care plans.
Many people will find that a Short Term health insurance plan is a more affordable and flexible solution to their health care needs than an Affordable Care Act (Obamacare) plan.
What's Important to Know About Short Term Insurance?
- 1. Short Term health insurance does not prevent the Obamacare tax penalty.Because Short Term health insurance plans do not meet the requirements set by the Affordable Care Act, you will still be responsible for paying the tax penalty called the “Shared Responsibility Tax.” See below for more info.
- 2. Short Term plans are not renewable, but instead require you to reapply if you wish to continue coverage.Part of the Affordable Care Act dictates rules for non-ACA plans. As a result, Short Term plans cannot be automatically renewed, and you will need to submit a new application.
- 3. You can be denied coverage due to pre-existing conditions.Like medical insurance before the ACA, Short Term plans can deny your application based on your current and past health conditions. Insurers will often probe up to 2 years of your health history.
- 4. Short Term plans are not required to have the same coverage benefits as Affordable Care Act plans.The Affordable Care Act established a very clear set of minimum coverage benefits called the “Ten Essential health benefits.” Since Short Term plans are not trying to be Obamacare plans, they will not necessarily fulfill these benefits.
Despite these downsides there are good reasons why a Short Term health plan might still be the right choice.
Why Would A Short Term Plan Still Work?
- 1. Short Term plans can be cheaper than enrolling in an ACA plan even after you consider the tax penalty.In particular, those who do not qualify Obamacare plan subsidies will be hit by especially high premiums.
- 2. Healthy individuals won't have to worry about pre-existing conditions.
- 3. You can still get an ACA plan if you do develop a condition that prevents you from reapplying for a Short Term plan.Affordable Care Act health plans cannot deny coverage for existing conditions. If you do develop a condition you might be out of luck for Short Term plans, but at least you rely on getting an ACA plan in the future.
- 4. Healthy individuals will not need to use many of the benefits provided by an ACA plan.As mentioned before, the ACA outlines a list of Ten Essential health benefits. Maternity services is one of these benefits and is required to be covered by Obamacare plans. As a simple example, a single male who buys an ACA plan will have maternity coverage that he’ll never need.
- 5. You might be unable to buy an ACA plan if you miss the Open Enrollment Period.If you are not enrolled in a plan before the Open Enrollment deadline, you won’t be able to purchase a health insurance plan unless you meet certain special requirements. In contrast, you can enroll in a Short Term health plan at any time.The deadline to enroll in an ACA health plan was January 31, 2017. The enrollment period for 2018 ACA plans will be November 1, 2017 to December 15, 2017.
Who Should Consider Short Term Health Insurance?
Short Term health insurance isn’t for everyone. People with certain chronic conditions or poor health might find that Short Term health plans lack the necessary coverage benefits for their healthcare needs. Additionally, people who have had a significant health event or medical condition in the past two years may have a hard time finding a Short Term health insurance plan that will accept them with their pre-existing condition.
Short Term health insurance is ideal for:
- People of any age under 65 in good overall health
- People who need health insurance for a specific period of time, such as an interval in between jobs
- A young adult who can no longer be insured through his or her parents’ health plan
- Foreign students attending U.S. schools
- People who need health insurance outside of the Affordable Care Act’s enrollment period but who do not qualify for a Special Enrollment Period
- Retirees in good health who no longer have employer-provided health insurance but are too young to enroll in the Medicare program
How Is Short Term Health Insurance Different Than Obamacare?
Affordable Care Act plans typically have broader benefits than found in Short Term health insurance and, without the premium subsidies available to some qualified purchasers, cost much more than Short Term plans.
All health plans that fit in the Affordable Care Act must have "10 Essential Health Benefits." Short Term health insurance plans, in comparison, do not have a standardized set of benefits. Short Term plans usually offer what would be described as "major medical coverage" that covers healthcare costs in the event of serious medical issues. Most Short Term plans also cover normal doctor visits for routine illnesses and injuries.
The chart below details some of the major benefit differences between Short Term health insurance plans and Affordable Care Act plans. It is important to note that Affordable Care Act plans do not deny care for pre-existing conditions nor do they reject applicants based on health problems.
|Short Term Health Insurance Plans||Affordable Care Act Plans|
|Coverage availability||Apply any time and get coverage as early as the next day||Apply only during Open Enrollment (or Special Enrollment due to a qualifying event) and get coverage in 2-6 weeks|
|Coverage duration||Coverage duration is less than three months. Many plans can be cancelled at any time.||As long as the plan is available. You can change plans during Open Enrollment (or Special Enrollment with a qualifying event)|
|Prescription drug coverage||Many Short Term health insurance plans provide a drug discount card but do not provide drug coverage. Some newer plans have a prescription drug coverage option for generic drugs not associated with a pre-existing condition. Brand name drugs and specialty drugs are typically uncovered.||Minimum of 1 drug per class must be covered but the minimum number of drugs per class is often more due to the benchmark chosen for each particular state.|
|Maternity and newborn care||Complications of maternity are covered but not standard childbirth services.||Full coverage. Applicants cannot be denied based on pregnancy as a precondition.|
|Mental health services||Coverage is included only when mandated at state level.||Coverage included, but states vary on their definition of “mental health” services, so while some do include learning disabilities or conditions like Autism, other states do not.|
|Substance use disorder services||Coverage is included only when mandated at state level.||All ACA plans have full coverage.|
|Rehabilitative and habilitative services and devices||Coverage is included only when mandated at state level.||All ACA plans have full coverage.|
|Preventive care||Some plans have selected preventive care benefits with cost-sharing. However, most plans do not cover preventive care services.||Preventative services must be provided without cost-sharing (cf.https://www.healthcare.gov/preventive-care-benefits)|
|Pediatric services - oral and dental care||Coverage is included only when mandated at state level.||All ACA plans have full coverage.|
|Healthcare provider networks||Short Term plans typically have broad acceptance among healthcare providers. Some have a preferred network with negotiated pricing for healthcare services and a larger non-preferred network where the plans pay 'usual and customary' fees for covered healthcare.||These plans have been noted for a significant use of "narrow networks" to increase the ratio of enrollees to healthcare providers.|
|Uninsured tax penalties||The maximum penalty is the national average premium for a bronze plan. For 2016, the tax is 2.5% of modified adjusted gross household income or $695 per person, whichever is greater.||ACA plans meet the requirements for avoiding the tax penalty.|
|Coverage of pre-existing conditions||These plans evaluate health status and pre-existing conditions when processing an insurance application and determine whether the applicant is approved or rejected for coverage.||These plans do not consider health status or pre-existing conditions when processing an insurance application.|
Do People with Short Term Health Insurance Face the Uninsured Penalty from the Affordable Care Act?
Yes. Since Short Term health insurance plans do not meet the minimum requirements of the Affordable Care Act, the plans do not qualify as "minimum essential coverage" and, consequently, their enrollees must pay what is called the “Shared Responsibility Tax.” For 2016, the tax is either 2.5% of modified adjusted gross household income or $695 per person, whichever is greater. You can learn how to calculate the monthly cost of Short Term health insurance with the tax and compare it with an Obamacare premium here.