Short-term Insurance

Short Term Health Plan: What Is It and What Does It Cover?

Updated on February 12, 2020


Short term health insurance appeals to a variety of people. Some might suffer from a lapse in permanent coverage because they’ve changed jobs, are looking for work, or have to wait for the annual Open Enrollment Period. Certainly, typically modest premiums for short term coverage and an easy enrollment process also attract many applications for short term coverage. Still, it’s important to weigh both the pros and cons of this kind of health coverage before making a decision.

What is short term health insurance?

In most states, Americans can buy short-term health insurance for a term of several months to a year. You also have the chance to renew your policy up to three times (meaning, for now, people can have short term health insurance for up to three years). In the past few years, health insurance companies designed their short-term health insurance plans to help people who needed to quickly obtain an affordable medical plan that could bridge the gap between permanent policies.

Going forward, health insurance companies that sell short term health insurance will try to attract more people who need cheaper premiums and intend to keep their coverage longer than a few months. Because of new government rules, allowable terms for short-term health insurance have expanded from nine to twelve months in 2019.

In addition:

  • Plan members can opt to renew their short-term coverage for up to three years.
  • There’s no need to wait for an Obamacare Open Enrollment period to sign up either, so short-term health insurance can provide immediate protection.
  • For 2019, the government also did away with the Individual Mandate, so there’s no penalty for failing to have major medical insurance either through the ACA website or work.

Pros and cons of short term coverage

While the federal government has relaxed the rules for short-term health insurance, each state can make its own insurance regulations. In fact, insurance is largely regulated by the state and not the federal government.

The following states still completely prohibit short-term health insurance, according to this report:

  • New York
  • California
  • New Jersey
  • Massachusetts

Vermont has moved in another direction. Instead of prohibiting short-term health insurance, the state has tried to force these temporary policies to offer all of the Essential Health Benefits that Obamacare policies must provide. Also, even though the federal government now allows for a 12-month term, Oregon, Illinois, and Maryland have passed state laws that only allow for more limited periods.

Yes, short-term health insurance can provide many people with a great value and a good solution when they need affordable coverage quickly. It’s just that these non-ACA plans aren’t regulated the same way that ACA policies are, so people must understand some risks they may take by opting for the temporary protection of short-term health insurance. The majority of states recognize that short-term health insurance performs a vital role, so they rely upon licensed agents to explain the pros and cons of various health insurance choices to their clients.

These are some potential drawbacks of short-term health insurance:

  • Short-term coverage may not offer any benefits for maternity, mental health, or any sort of pre-existing condition. If you suffer from some pre-existing conditions, you could be denied coverage, unlike with Obamacare.
  • While some short-term coverage is guaranteed renewable, some is not. This means that you have to re-apply for short-term health insurance at the end of every term. The problem is that if you or a family member has developed a serious illness, they may not get accepted.

ACA policies cannot decline applicants because of pre-existing conditions. Even with the federal government’s relaxed rules for short term coverage, most people should still consider these temporary policies as a temporary solution. It’s just that people in most states can rely upon them for longer periods of time than they could in the past.

Who should consider short term health insurance plans?

In most cases, short term health insurance typically costs much less than ACA major medical health insurance. According to eHealth’s own data:

  • Premiums for unsubsidized ACA plans average about five times as much as for short term health insurance.
  • Even premiums for subsidized Obamacare plans average about three times more than premiums for short term coverage.

Short term coverage could offer a good solution for people who want an affordable way to protect themselves against unexpected or emergency medical bills. In addition, short term health insurance can provide the proof of coverage that people need to participate in various activities or vocations.

Easy applications, modest premiums, and no waiting for enrollment periods can all make short term health insurance seem like an attractive choice for people who lack affordable access to permanent medical insurance. Good examples of people who can benefit from short term health insurance might include:

  • Young people who have just aged off their parent’s plan
  • Families who missed Open Enrollment for the ACA Marketplace
  • Seniors who will turn 65 and collect Medicare benefits in a few months
  • New employees who have to wait for group benefits to begin

Note that even if you missed this year’s Obamacare Open Enrollment, you may still have the option to enroll in a plan if you qualify for a Special Enrollment Period. Some examples of events that will trigger a Special Enrollment Period include loss of job-related group health, divorce, marriage, income changes, and moving away from a network plan’s service area. If you don’t qualify, you still have the option of enrolling in short-term health insurance at any time of year.

How to compare short-term health insurance policies

At eHealth, we don’t just make it easy to compare short term health insurance, we also allow you to compare short term health insurance with other health insurance options. Additional choices can include both Obamacare and non-Obamacare medical plans. Besides individual and family medical plans, we can also help you shop for dental and group health insurance. Explore your health insurance options now.

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