What are the Pros and Cons of Short Term Medical Coverage?
As the name implies, short term medical insurance is meant for people who will have brief gaps in coverage such as when switching between jobs. It can be a lower cost alternative to COBRA or individual marketplace plans under the Affordable Care Act. Some of the drawbacks to short term coverage include:
No coverage for pre‐existing conditions
Any condition for which medical advise, diagnosis, care or treatment was recommended or received before the insurance becomes effective is usually excluded in a short term medical policy. Anthem BCBS Enhanced Choice is one exception, but the monthly premiums are usually higher than other short term options.
Underwritten based on medical history
There is no guarantee of approval for a short term policy. The medical questions tend to screen for major or chronic conditions (cancer, heart, stroke, diabetes, organ disorders, AIDS, etc). See an example of the questions asked by United Healthcare, Anthem and National General here.
No Coverage for Preventive Care or other Essential Health Benefits
You should carefully examine exactly what is covered under a short term policy, in particular reviewing the Exclusions section. These policies are not subject to the “Essential Health Benefits” requirements of the Affordable Care Act and can exclude things like maternity, mental health, preventive care, prescriptions and more. A sample list of exclusions is available here.
Coverage valid for 12 month intervals (or less! or more!)
Things get a little messy here. Depending on the State you live in and what insurance companies are offering, short term insurance may be available for 6 months, 12 months or 1 day short of 3 years.
Indiana allows the longer short term policies (nearly 3 years).
Does not count as Minimum Essential Coverage
Short term policies do not meet the standards for Minimum Essential Coverage (MEC) outlined in the Affordable Care Act. The requirement for all Americans to have MEC is still in place but the penalty for not having MEC has been reduced to $0 since 2019.
A Note on Timing:
For Indiana residents, the smart move if you’re purchasing short term coverage is often to have the policy expire/renew on December 31st, to coincide with the Marketplace/Affordable Care Act Open Enrollment Period (which runs from Nov 1st to Dec 15th every year, with coverage beginning January 1st).
So why would someone want to enroll in a short term policy?
Significantly lower monthly premiums
Short term plans are designed to be a lower cost policy and still offer protection for major medical events. For example, for a 40 year old male, a $5,000 deductible with 100/0% co-insurance after deductible is around $210/month. Premiums can further be lowered by prepaying for the entire policy period in advance, and by increasing the deductible.
Typically includes a PPO network
Use of a PPO network varies from policy to policy, but many short term plans include a PPO network, so the policyholder benefits from network pricing agreements.
Comprehensive List of Covered Services
Policyholders are not limited to only having coverage due to an accident or specific illness. Unlike indemnity type plans (Hospitalization, Critical Illness, Accident, Cancer, etc) claims are paid on an incurred basis instead of only paying a specific dollar amount per admission or based on a specific diagnosis.
No enrollment limitations (sign up any time of the year)
Marketplace enrollments are limited to the November 1st ‐ December 15th open enrollment period and strictly enforced special enrollment events. Short term policies are available year round and coverage can start the next day.
Need a Quote?
Allstate Health Solutions offers competitive rates for their short term medical policies and have access to Aetna or Cigna for the PPO network.
Pivot Health has some of the most affordable plans available on the market. Their “Epic Base” plans are available with a $5,000 or $10,000 deductible with 0% co-insurance after the deductible.
United Healthcare offers a wide range of non-Marketplace individual policies. If you want to run a quote yourself, make sure you’re quoting short term plans and avoid what they call “fixed benefit health insurance”. (By default you should see the short term plans).
