What is Short Term Health Insurance?

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Short-term health insurance plans are designed for individuals and families who need access to health coverage in dire circumstances. It is intended to be temporary and does not provide minimum essential coverage, but it can act as an affordable safety net for those in times of transition who find themselves without a comprehensive healthcare plan. 

The Effect of Annual Enrollment Periods

All major healthcare plans require policyholders to purchase their insurance during the annual Open Enrollment period. Short-term health insurance plans do not fall under this restriction and can be purchased at any time throughout the year. This is to give individuals and families the option to purchase some type of health coverage if they miss the Open Enrollment period and do not qualify for Special Enrollment.

Why Should You Get Short Term Health Insurance

Short-term health insurance may be a good option if you are in need of immediate health coverage for the following reasons:

  • You are waiting for major health coverage to activate in the near future (Medicare, benefits at a new job, etc.)
  • You miss the Open Enrollment period and do not qualify for a Special Enrollment Period
  • You are in between jobs
  • You are transitioning off your parents’ insurance plan

Can You Renew Short Term Insurance Plans?

Some states allow policyholders to renew their short-term insurance up to 3 times. The maximum duration of short-term health coverage is up to 36 months, including renewals. Other states may allow one renewal, or prohibit them entirely. In some states, it is possible to apply for a new short-term plan if you reach the renewal maximum.

The Coverage Offered by Short Term Insurance

Short-term health insurance coverage varies widely depending on the plan and the insurance company selling it. Federal regulations do not require short-term plans to cover all minimum essential health benefits required by the Affordable Care Act (ACA), which means there are several medical services that short-term plans may not cover costs for. Some of these include maternity care, mental health services, outpatient prescription drugs, and substance abuse treatment. 

In general, short-term health insurance provides some level of coverage for preventive care, routine doctor visits, urgent care, and emergency care. Some plans also offer cost savings for those who visit in-network providers. Before purchasing short-term insurance, it’s important to read all exclusions and limitations and understand what is and isn’t covered in that specific plan.

How Much Are You Going To Pay?

The appeal of a short-term health plan is its affordability. On average, short-term plans have much lower premium costs than ACA-compliant insurance plans. They can be as little as $200 a month or lower, but may be higher depending on what coverage is offered.

Lower premiums, however, means higher out-of-pocket costs. Because short-term plans do not cover all medical services, some health expenses will have to be paid out-of-pocket until you reach your deductible. Deductibles vary from plan to plan but are generally more expensive than major health plans that offer essential coverage.

Risks of Obtaining Short Term Health Insurance

Short-term insurance plans are designed to provide temporary health coverage in times of transition. They are not considered adequate healthcare under the Affordable Care Act because they do not cover the ten minimum Essential Health Benefits. For this reason, those who purchase a short-term health plan will have fewer benefits, and may not be financially protected if they experience an unexpected illness or diagnosis. Because short-term insurance plans are not minimum essential coverage as defined by the ACA, policyholders are not eligible for federal tax subsidies to help pay for them.

Short-term health plans are designed to be temporary, so the duration of coverage can be as little as 3 months. The maximum duration of any short-term plan is 12 months (364 days) before they need to be renewed. Many short-term plans do not accept applicants who have had short-term plans in a recent period. 

Do All States Allow Short Term Insurance Plans?

Most states in the U.S. allow the sale of short-term health plans, except the following: New York, New Jersey, Massachusetts, Rhode Island, Vermont, California, Colorado, Connecticut, Hawaii, and New Mexico. These 10 states ban short-term health plans outright. The states which do allow them have state-specific regulations that affect plan duration and possibility of renewal.

Some states follow the federal rule and allow residents to purchase short-term healthcare that provides year-long coverage and is renewable up to 3 times. Other states shorten coverage duration to last 3-6 months, and others do not allow renewals unless there is a gap in between purchases. The variety of short-term health plans available depends on your state.

Click here for a specific list of state regulations.

Are Preexisting Conditions Part of This Coverage?

In most cases, short-term insurance plans do not provide coverage for preexisting conditions. Short-term plans may require medical underwriting – a process in which insurers evaluate an applicant’s medical history in order to determine their eligibility for health coverage. Those with preexisting conditions may be rejected or be charged surged premiums if they need continuous medical support. If you have a preexisting condition, consider talking to your current insurer about extending your plan.

Pairing Short-Term Insurance Plans With Others 

Because short-term health plans do not cover all ten essential health benefits, it may be a good idea to pair a short-term plan with other insurance plans for well-rounded coverage. It can be paired with dental, vision, critical illness, and/or accident insurance plans.  

Where Can You Purchase This Type of Plan?

Depending on the state you live in, the short-term health plans available to you will vary in benefits, price, and duration maximum. Be sure to review whether or not your state allows short-term plans. If it does, check the regulations on duration and renewals before purchasing. Short-term plans are not sold through the Marketplace and must be purchased through a private insurance company. To shop for short-term health insurance plans or learn more, click here.

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