Short-term or temporary health insurance provides health coverage for a limited period of time.
Short-term health insurance plans are super popular these days. It’s an unintended result of the health reform law – one that Obamacare’s architects may not have anticipated. (To learn more about short-term health insurance, read our eBook: Short-Term Health Insurance Ebook 2017)
At eHealth, consumer interest in short-term health insurance jumped more than 130% between 2013 and 2014, when many Obamacare health reform rules went into effect.
So why are people rushing to sign up for short-term plans, even when short-term plans don’t meet Obamacare coverage standards and could expose you to tax penalties?
To answer it, eHealth went straight to the horse’s mouth and surveyed more than 500 short-term customers to see what’s driving the move to short-term coverage.
Based on our survey, here are five reasons Americans are opting for short-term health insurance:
1. You can apply for short-term coverage any time you want
Obamacare rules in 2014 made it hard to get a traditional major medical health insurance plan if you don’t buy during the annual open enrollment period. Between February 16 and November 1, 2015, you must have a major life change, like getting married, moving to a new area or having a baby, to qualify for major medical health insurance.
If you need health insurance outside of open enrollment and haven’t had a qualifying life event, short-term health insurance is often your next-best option until the next open enrollment period starts.
Our survey of short-term customers confirmed this – a majority (63%) of applicants said they first considered a long-term, major medical health insurance plan before enrolling in a short-term plan.
2. Short-term coverage costs a lot less than major medical coverage
At eHealth we looked at what people pay each month for short-term plans and compared it to what they’re paying for a traditional major medical plan.
Answer? Short-term plans cost less than half the price.
The average monthly premium for individual major medical plans selected during the 2015 open enrollment period was $286. By contrast, the average premium for individual short-term plans selected in 2014 was only $110.
About three quarters (76%) of our survey respondents said the affordability of their short-term plan was one of the things they liked most about their coverage.
Of course, there are reasons short-term health insurance plans cost less than major medical plans. Keep reading to learn more about how short-term plans and benefits differ from major medical plans.
3. Most people like their short-term health insurance plans
Among survey respondents who had actually used their short-term coverage, only 5% said they were unhappy with the coverage provided. Nearly seven-in-ten (69%) said they were satisfied with the coverage offered by their short-term plan. About 27% were on the fence.
Nearly nine-in-ten (89%) of those who had used their short-term plan said it still allowed them to see the doctors they wanted to see.
4. Sometimes people only want coverage for the “short term”
Nearly half (47%) of our survey respondents said they chose a short-term health plan because they only needed coverage to help them fill a gap before they would have access to major medical coverage.
That’s good news, because short-term health insurance is not traditional major medical coverage, which means it doesn’t meet the Obamacare standards, and it won’t protect you from tax penalties.
While short-term coverage doesn’t protect you from a tax penalty, it can still protect you from a big, unexpected medical bill while you wait for an open enrollment period or employer-based coverage to start.
5. Some people don’t mind having fewer benefits
Short-term plans don’t provide the richer benefits provided by a major medical plan, so things like maternity care and care for pre-existing conditions aren’t typically covered. Prescription drug coverage is an option on only some plans.
Short-term insurance is “catastrophic” coverage that provides a limited, temporary shield against unforeseen medical expenses, but that’s fine with many short-term customers.
When asked what they liked most about their short-term plan, nearly a third (32%) said that short-term coverage provided them with the benefits they value most in a health insurance plan.
Here is how the benefit differences break down:
About one-third of the customers in our survey said they liked the fact that it was easy to qualify for a short-term plan. This is a little misleading.
Obamacare rules about pre-existing conditions don’t apply to short-term plans. That means your application for coverage can be declined based on your personal medical history. In fact, our research found that in 2014 about 12% (that’s one in eight) of those who applied for short-term health coverage had their applications declined.
So, if you’re healthy, getting short-term coverage can be quick and easy. But if you’re dealing with some health issues and you’re uninsured, most short-term plans may not let you enroll or may not cover you for certain situations after you enroll.
That said, you can still look for something called “guaranteed issue” short-term insurance, which can provide you with some insurance protection until the next open enrollment period comes around in November. These plans will not cover your pre-existing medical conditions, but they will let you enroll even if you have health issues and they can cover you for certain unforeseeable medical expenses such as accidents.
The Note: Short-term coverage could get even more popular very soon
The Supreme Court is scheduled to issue a ruling on a case this June that could send even more people out to shop for short-term health insurance.
Depending on the court’s decision in King v. Burwell and the government’s response to the decision, government subsidies that millions of people rely on to help them pay for major medical coverage could be in danger. A separate eHealth survey of people who identified themselves as subsidy recipients found that 89% would likely drop their coverage if they lost their subsidies.
If their subsidies go away, the amount many of these folks are paying each month for their health insurance could more than double! Where might they turn for a less costly alternative instead? That’s right. Short-term health insurance.