Short-term coverage plans are useful if you want the peace of mind that insurance provides, but aren’t in a situation in which you can get longer term major medical coverage. This can happen if you missed the open enrollment period for major medical insurance, are waiting for your major medical plan to start, are waiting for your Medicare coverage to begin, or need proof of insurance quickly.
The coverage you get with short-term plans is different from the benefits conferred by major medical plans that comply with the Affordable Care Act (ACA), also called “Obamacare.”
Short-term plans generally cover the services and treatments related to unexpected illness and injury, such as outpatient visits to the doctor, emergency room visits, hospital stays, surgeries, and related x-rays and laboratory services.
Some short-term plans also include coverage for prescription drugs and other benefits, but charge more for those additional benefits. Of course, the specific benefits depend on the particular short-term plan and insurance company you choose.
Most insurance companies require applicants to answer a medical questionnaire when they apply for a short-term policy, and they can decline to cover you if you don’t meet their criteria. But, if you are approved, you can usually get your short-term coverage quickly.
You should be aware that short-term plans can only cover you for a period of 30 days through 12 months. That gives most people plenty of time to get an ACA-compliant health insurance plan during open enrollment.
You should also know that having a short-term insurance policy doesn’t meet the health insurance requirements of the ACA, so you may still be subject to a tax penalty on your next tax return.
Short-term plans don’t include all routine medical needs. Two important exclusions are pre-existing conditions and maternity coverage. Often, drug coverage and services for preventive, dental, vision, and mental-health care are also excluded.
You’ll need to disclose any pre-existing conditions to your insurance company when you apply for your policy. If you fail to inform the company that you have a pre-existing condition, your policy can be terminated and your pre-existing condition won’t be covered.
The ACA-compliant medical insurance plans are much more extensive than short-term insurance and can last for longer terms. With these “Obamacare” plans, you can’t be denied coverage or denied the minimum essential health benefits these plans must cover.
The 10 minimum essential health benefits are:
You can’t apply for the ACA-compliant medical plans at any time of year, as you can with short-term insurance. To apply for one of the ACA medical plans, you must enroll during the open enrollment period or during a special election period (if one opens up for you because of a major life event, such as getting married or divorced, giving birth or adopting a child, or moving).
What’s more, when applying for an Obamacare plan, you can’t be declined for coverage, even if you have pre-existing conditions.
You can also purchase other forms of insurance so that you have additional coverage while you have short-term coverage.
For example, accident insurance gives you cash payments for covered health events, which you can then use to pay for hospital stays, examinations, and visits to the emergency room, as well as temporary housing and transportation costs associated with your health needs.
Critical-illness insurance pays you a lump sum in the event that you are diagnosed with a critical illness such as stroke, heart attack, or cancer.