What is the difference between a short-term health insurance plan and a major medical plan?
Supplemental Health Insurance and The Affordable Care Act (ACA)
Health insurance can be complicated and the Affordable Care Act can make it even worse.
When you start to talk about short-term health insurance it can get even more complicated.
The easiest way to understand short-term health insurance versus major medical insurance is think of each in two separate bundles:
- Bundle 1: Major medical health insurance – Major Medical is insurance that covers all of the benefits required by the Affordable Care Act.
- Bundle 2: Short-term or bridge health insurance – This type of insurance aims to protect people for a short amount period of time when they’re in a transition, like a move or job change.
Let’s review these types of coverage and some of the health insurance verbiage related to them that everyone should know.
Bundle 1: Major medical health insurance plans
Major medical health insurance plans include all of these different types of coverage:
- Group health insurance: This is health coverage offered by an employer (in most instances).
- Major medical health insurance for Individual and families: You cannot get these on the government’s Exchanges. These plans can be bought for one person or an entire family on a non-government or broker web site like eHealth.com, directly through insurance companies or through independent insurance brokers
- Subsidy-Eligible Qualified Health Plans: These plans are sold on government exchanges as well as on many private marketplaces and through independent agents.
- Medicare or Medicaid: Medicaid is usually if you’re low income, Medicare is mostly for seniors (but not always).
Bundle 2: Short-term (also called “interim” or “term”) health insurance – These plans are not designed to be used to supplement coverage ACA/major medical health plans.
These plans aim to be another option for people who can’t qualify for or afford major medical health insurance if they’re uninsured for a short period of time.
- How does short-term insurance work? – These plans provide health insurance for a limited amount of time. They’re best used if you’re waiting for major medical health insurance to begin trough an employer or spouse. Short-term insurance usually provides coverage for up to 12 months.
- Will short-term health insurance make you pay the Affordable Care Act tax penalties? The tax penalty was repealed for 2019, but states like Massachusetts and New Jersey have state taxes that you may have to pay if you go uninsured. Short-term plans are not available in those states.
- How long can I keep short-term health insurance? Short-term coverage is available in 6 and 12-month terms in most states. Some states limit short-term coverage to 90-days, and others do not allow people to buy short-term plans.
- Can short-term insurance be bought after the Affordable Care Act enrollment period? Short-term health insurance can be your only option if you miss open enrollment and don’t have a life event that qualifies you to buy major medical – like a move or job loss. The next open enrollment starts November 1, 2018 and ends December 15, 2018, in most states.