Affordable Care Act
You May Have a Short-Term Health Plan, But Should You Have a Major Medical Plan?
Published on September 29, 2017
If you want to understand short-term health insurance and how it works, a great place to start is with our new eBook, 3 Steps to Understanding Short-Term Health Insurance.
Short-term health insurance plans provide limited, but affordable benefits when compared to a major medical plan that meets all of the benefit requirements of the Affordable Care Act (ACA or Obamacare).
To help you understand how short-term health insurance differs from major medical coverage, we’ve put together:
- An educational video: “How does short term health insurance work?”
- Top 5 things someone with a short-term health plan need to know
- A chart depicting the differences between short-term insurance and major medical coverage
- 5 frequently asked questions
“How does short term health insurance work?”
Top 5 things someone with a short-term health plan need to know:
If you’re wondering what the benefits of short-term health plans are, here are five reasons short-term coverage may be a good option for you:
- They start quickly – In some instances, you can have short-term coverage in place within 24 hours.
- They’re affordable – Between April and June of 2014, the average individual eHealth customer paid $107 per month, on average, for short-term coverage – however, short-term coverage is more limited.
- They cover emergencies – Most short-term health plans are designed primarily to provide you with coverage and protection from unexpected injuries and illnesses that require emergency medical care.
- They satisfy many non-government requirements for insurance – If you need to verify that you have health insurance for travel, or in order to get admitted to certain types of schools, like nursing or dental schools, short-term plans often satisfy those coverage requirements.
- You can cancel easily – When you apply for short-term health insurance, you’ll typically have the option to pay for your coverage all at once, or you can pay month-to-month. If you pay month-to-month, it’s very easy to cancel your plan at any time.
Frequently Asked Questions about Short Term Health Insurance
QUESTION: “What kind of tax penalty will I need to pay if I stick with my short-term plan?”
ANSWER: First, know that you may qualify for an exemption from the tax penalty if you cannot afford major medical health insurance. Under ACA rules, health insurance is considered “unaffordable” when the lowest-priced plan available in your zip code costs more than 8.05% of your household income (MAGI) in 2018 (see details below). *Note that your household income must be above 400% of the Federal Poverty Level to qualify for this exemption.
If you don’t qualify for an exemption, and you don’t have major medical health insurance that meets the Obamacare coverage requirements for more than three months in a row, you may face a tax penalty of up to 2.5% of your taxable income, whichever is greater in 2018. The penalty goes away in 2019. The maximum penalty you can pay is equal to the national average premium for a bronze level health insurance plan.
QUESTION: “I thought I had to experience some kind of qualifying life event before I could enroll in a traditional “Major medical” health insurance plan. Am I wrong?”
ANSWER: Most of the year you’ll need to experience a qualifying life event (such as marriage, the birth of a child, moving to a new city, or loss of minimum essential coverage.) before you can enroll in a major medical health insurance plan. During the Affordable Care Act’s nationwide open enrollment period, you can enroll in any major medical health insurance plan you want, without fear of being turned away.
QUESTION: “Can’t I just keep buying short-term coverage indefinitely? Why should I switch to a traditional individual or family plan?”
ANSWER: Most short-term plans limit your coverage to a maximum of 12 months at a time, or less. And most short-term health insurance companies will limit how many times you can repurchase coverage in a row. It’s possible to be declined based on your medical history, so if you get sick and then need to re-apply for coverage under a new short-term plan, you may be out of luck. You’ll also miss out on the richer benefits provided by major medical health insurance plans that meet the standards of the Affordable Care Act. Don’t treat short-term coverage like a long-term solution. It’s not.
QUESTION: “What if I can’t afford a major medical health insurance plan?”
ANSWER: Depending on your income, you may qualify for government subsidies to help make your monthly premiums more affordable. If you’re age thirty or younger you may also be able to choose a “catastrophic” plan which will also meet the coverage requirements under the law. These often have less expensive than typical “bronze,” “silver,” “gold,” or “platinum” plans.
With income above 400% of poverty, you may qualify for an exemption. In calculating affordability for the present report, eHealth used figures derived from IRS Rev. Proc 2017-36.
QUESTION: “I don’t know where to start when it comes to shopping for health insurance. Where can I find help?”
ANSWER: Shop online at eHealth.com. eHealth can help you understand your coverage options, provide you with quotes from competing insurers, and help you find the plan best suited to your personal needs and budget.