Short-term Health Insurance Pros and Cons
Short-term insurance plans are a type of health coverage that can be purchased off-exchange. Generally short-term plans cover an enrollee for a fixed period from one month to a year. When the duration of the plan is only a few months, the plans are often referred to as "short-term" or "temporary". Plans that last 364 days are sometimes called "Term Health Insurance". Short-term insurance can be used to cover health insurance coverage gaps when people lose or change employment, graduate from college, or travel.
Unlike Affordable Care Act qualified health plans, short-term insurance plans are not required to cover Essential Health Benefits such as preventive care, maternity care, and the treatment of mental illness or substance abuse. Furthermore short- term insurance plans may reject applicants based on current health status or refuse to cover medical services or prescription drugs for pre-existing conditions. For this reason short-term insurance plans can have significantly lower premium costs than Affordable Care Act plans.
Below is a non-exhaustive list of pros and cons of short-term health insurance plans.
|For many short-term plans, as soon as your application is complete, you will be able to find out whether or not you qualify for coverage.||Health status, medical history, and pre- existing conditions may be used to reject applicants or restrict their coverage by not covering medical services or prescription drugs for pre-existing conditions.|
|A short-term plan can cover gaps in health insurance coverage between two long-term plans.||Short-term plans may exclude medical services such as preventive care, maternity care, and the treatment of mental illness or substance abuse since short-term insurance is not subjected to the requirements of the Affordable Care Act.|
|￼Many short-term plans take effect within 24 hours of submitting the application and paying the premium.||￼If you enroll in short-term health insurance, you will not be able to qualify for COBRA insurance1 after the short- term coverage ends.|
|Short-term plans generally incur lower premium costs than Affordable Care Act health plans since they can use medical underwriting to reject applicants based on poor health status.||Short-term plans do not usually have a cap on out-of-pocket costs and they may limit the maximum amount of costs that the insurer can pay.|
|Short-term insurance plans have a wide range of durations from one month up to almost a year in some states.||Short-term insurance plans are not typically renewable. You can enroll in a new short-term insurance plan once your plan ends, but your current plan cannot be renewed.|
|Many doctors across the United States accept short-term insurance, but coverage may be limited to a specified provider network.||Since short-term health insurance does not qualify as creditable coverage under the Affordable Care Act, enrollees in short-term plans will have to pay an uninsured tax penalty for not enrolling in a qualified health plan. In 2014 the uninsured penalty for an individual will be the greater of $95 or 1% of modified adjusted gross household income.￼|
|International travelers, people between jobs, seasonal employees, and recent graduates out of college can use short- term insurance plans.||Many short-term insurance plans deny coverage to people over 65 years old.|
|Although short-term health insurance plans have a smaller market and fewer available statistics for comparison than typical full-year health insurance plans, it is easy to find and apply to short-term insurance plans online.||Short-term insurance plans cannot qualify for premium subsidies like metal plans offered through health insurance exchanges.￼￼￼|
For more information about short-term health insurance plans, read the Infostat 5 Myths about Short-Term Health Insurance.
1 The Consolidated Omnibus Budget Reconciliation Act (COBRA) allows people to temporarily keep their group health coverage even if they lose their eligibility for that coverage because of events such as employment termination, a drop in work hours, retirement, or divorce.