Have you ever been between jobs, without access to major medical insurance, and wondered if any kind of cost-effective health insurance was available to fill that gap? Short term health insurance is an affordable and flexible alternative to major medical insurance. It can be a viable option for individuals who do not have employer-provided health insurance, and it offers a wide range of coverages. But how do you know if short term health insurance fits your current financial and medical needs? Let’s break it down for you…
Short term health insurance provides insurance for a defined period of time and generally has a much lower monthly premium than other forms of major medical health insurance. It also has two big advantages:
- You are able to use your short term health insurance to pay for services at any doctor or hospital, and with no open enrollment restrictions you can apply at any time.
- Since short term health insurance offers varying levels of benefits, you are able to customize your coverage. The Affordable Care Act (ACA)—also known as Obamacare—requires its plans to cover “10 essential health benefits,” but not all these “essential” benefits are necessary for each individual. For example, one of these “benefits” covers maternity care. If you are a male or a female who is not ready to have a baby, you are paying more for this benefit. If you elect to have short term health insurance, you can tailor your plan to have coverage for your specific needs.
On the other hand, short-term health insurance is not the same as major medical insurance, and it does NOT comply with Obamacare. What does that mean for you? If you were to have short term health insurance in 2018, it means you may have to pay a penalty on your taxes for those months you didn’t have government-mandated health insurance. In 2018, the penalty for an individual is $695 or 2.5% of income—whichever is higher. For a family, it is $2,085 or 2.5% of income (with a maximum of $13,100)—again, whichever amount is higher.
Regardless, short term health insurance is generally significantly less expensive and more affordable than Obamacare. A study from eHealth found that, on average, short term health insurance premiums cost 80% less than Obamacare. Some plans can be as little as $25 a month, whereas Obamacare averages around $400 a month. If you consider paying the tax penalty, you could potentially save over $3,800 as an individual.
The good news is, starting in 2019, you will no longer have to pay the penalty for not having major medical health insurance.
Also in the good news column, short term health insurance is no longer limited to a maximum of 90 days. As of October 2, a Trump administration ruling allows insurers to sell short term health insurance for up to 12 months, with the option to renew up to 3 times. With this new regulation, you now have more health insurance choices at more affordable prices. (Keep in mind, though, each state has its own regulations and can continue to limit the plans to shorter terms.)
Because short term health insurance is not major medical, it is not for everyone. If you have poor health, chronic conditions, or complex medical needs, you will be better served by an ACA-compliant plan. For example, short term health insurance can deny coverage for pre-existing conditions, whereas Obamacare cannot deny coverage. Insurers can also charge individuals more based on their age, gender, and medical history.
When considering short term health insurance, make sure to look at the fine print. Some plans have limitations or exclusions when it comes to covering certain accidents, such as horseback riding or skiing, and less than 1/3 of plans provide prescription coverage.
Finally, most short term health insurance plans have “lifetime limits;” that is, insurers can limit the amount of care that is covered. For example, they will only cover medical expenses up to a certain dollar amount for the duration of the plan and the rest is out of pocket.
If you would like to learn more about how SGIC can assist you with a short term health insurance plan, please contact us today at (888) 912-4767 for more information.