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What’s This Going To Cost Me? Paying for Short Term Health Insurance

You're probably reading this because you're concerned about your Short Term insurance costs. A little digging helped you discover Short Term premiums are generally less expensive than the premiums you've looked at for a major medical Affordable Care Act (ACA) health plan. Now you're more curious about Short Term plans. There's no doubt one of the most attractive qualities of Short Term is that up front "sticker" price.

But it's time to kick the tires, pop the hood and take a closer look. To make the choice as to whether Short Term health insurance, also called Term insurance or Temporary health insurance, is the right choice for you and your family right now, you need to consider some cost issues:

Note: Plan design and availability vary by state. Find out what's available where you live. View Plans

Short Term Health Insurance Costs Versus ACA Plans

Your Short Term Insurance Premium: First Things First

Simply put, your premium is the amount you pay for your health coverage for a specific period of time, usually paid monthly.

The good news–generally speaking, Short Term premiums are much less than premiums you would pay for an Affordable Care Act (ACA) health insurance plan.

But (you knew there was a "but" coming, didn't you?) simply comparing a Short Term premium to that of an ACA health plan won't give you an accurate answer of how much your Short Term medical plan is going to cost. There's a little more to it.

Short Term Health Insurance

ACA Plans

Potential ACA tax penalty
No tax penalty;
Smaller Premiums
Larger Premiums

Short Term Health Insurance vs. the ACA: Penalties, Exemptions and Subsidies, Oh My!

The first and last thing to remember here is this: Short Term plans do not meet the minimum essential coverage requirements under the ACA, also known as Obamacare. They are designed solely to provide temporary insurance during unexpected coverage gaps. Choosing a Short Term plan may result in your receiving a tax penalty. That's a cost you need to plan for if you want to choose temporary health insurance over an ACA plan.

Credits and Subsidies: Help with Insurance Costs When You Choose ACA Health Plans

Remember, too, you may be giving up on help in paying for your health insurance by choosing a Short Term plan. If you get an ACA health plan, you may be eligible for help paying for your insurance in the form of:

  • Tax credits on your premium (if you are below 400% of the federal poverty level)
  • Cost sharing reduction subsidies (if you are below 250% of the federal poverty level) that can lower what you pay out-of-pocket for copayments, deductibles and coinsurance.1

In contrast, Short Term plans do not qualify for any credits or subsidies.

Tips for Saving Money on Short Term Health Insurance

The government may not help you cut your costs on Temporary medical insurance, but by using these tips, you can take action to find the best Short Term health insurance rates for your situation and cut your costs:

  • Choose a higher deductible. The deductible is what you have to pay of the expenses covered by your insurance plan before the insurance will pay anything. If you choose a higher deductible, meaning you pay more before the insurance starts paying, you can reduce your premium.
  • Choose a plan with fewer benefits. You can get different levels of Short Term coverage with different benefits for different prices. For example, you can control if your plan includes copays for a doctor's office visit or if you want to include prescription coverage.
  • Pay your total premium up front. If you can pay the total premium for the amount of time you want to be covered up front, you can save 24% when you pay in that one lump sum versus paying monthly.2
  • Choose a Per Cause Deductible option. With some Short Term plans, you can take more responsibility by paying a separate deductible for each illness or injury, as opposed to one deductible for your whole term. By doing so, you can reduce your premium by about 10%.3
  • Get a refund on your premium. Buy as many days of coverage as you think you will need and receive a refund on your premium if you secure another health care coverage option before the end of your term.
  • Stay in-network for care. In-network health care providers agree to provide you care at lower fees. If you stay with in-network doctors and providers, you can save money.

Exemptions to the ACA Tax Penalty

Possible exemptions to the ACA tax penalty include:

  • You went without ACA health care coverage for less than three months during the year.
  • You don't file taxes because your income is below the tax filing threshold.
  • Coverage would cost you more than 8% of household income.
  • You applied for but were denied Medicaid or Children's Health Insurance Program (CHIP) coverage.
  • You experienced certain hardships: homelessness, bankruptcy, medical expense debt, among others.

These and other circumstances may qualify you for an exemption. Seek out a qualified tax advisor if you think you might qualify for an exemption.

After Your Premium: What You Pay For

Once you have your Short Term plan in place, you need to understand four key concepts to keep an eye on your health care costs:

  • Deductible
  • Out-of-pocket maximum
  • Copay
  • Coinsurance

Deductibles and Out-of-Pocket Maximums: Taking It to the Limit

  • Your deductible is the amount you have to pay for expenses covered by your insurance plan before the insurance will pay anything.
  • Your out-of-pocket maximum is the most you will pay during a term toward expenses covered by your plan.

So, generally speaking, when you hit your deductible, your insurance plan starts paying toward your covered expenses. Then when you hit your out-of-pocket maximum, you stop paying anything toward your covered expenses. Insurance pays 100% of them after that point.

Copays and Coinsurance: Clearing up the "Co-fusion"

  • A copay is fixed-dollar amount you have to pay to receive certain services. For example, you may have a $35 copay for a doctor visit or a $20 copay for prescription drug you take. Note: Usually, copays do not count toward your deductible. Check your plan for specific information.
  • Coinsurance is the percentage you pay of your covered medical expenses after you've met your deductible. So if your coinsurance is 30%, then after you meet your deductible, you would pay $30 of every $100 of any covered expenses. You pay that percentage until you hit your out-of-pocket maximum.

Note: Some Short Term insurance plans do not pay any out-of-network benefits, meaning in those cases, you would be responsible for any medical expenses from care provided by a doctor or facility not in the plan's network. Also, some plans do not have an out-of-pocket maximum. With those plans, you would keep paying your coinsurance rate for any covered medical expenses. Check your plan brochure for details and understand your payment responsibilities before you buy.

Shop for Temporary Health Insurance Plans

Shopping for Short Term Insurance? This Is Important

As you are shopping, remember that Short Term plans and ACA plans are not comparable products.

ACA health plans are guaranteed issue, meaning you cannot be denied coverage based on preexisting conditions. Also, ACA plans are required to cover certain minimum essential health benefits. Also, generally speaking, as long as you pay the premium, you can keep your ACA health plan.

Short Term health insurance is not required to cover the same benefits.1 Plans can vary in what they cover. Also, they typically do not cover preexisting medical conditions. A series of medical questions determines your eligibility for these plans. Also, Short Term health plans are restricted to terms of coverage under 3 months.

So, while you may save money choosing Short Term, be sure you are paying for the right coverage for you before you buy.

4 This applies only if you choose Silver plan on the federal Health Insurance Marketplace or your state’s marketplace.

4 Lump sum savings apply only to the medical plan premium. Savings do not apply to premiums for optional benefits added to the medical plan.

8 Check your state’s plan brochure for more information.

10 Premiums do not count toward deductibles. Usually copays do not count toward deductibles. Check your plan brochure for more information.

1 Short term health insurance is medically underwritten and does not cover preexisting conditions. This coverage is not required to comply with certain federal market requirements for health insurance, principally those contained in the Affordable Care Act. Be sure to check your policy carefully to make sure you are aware of any exclusions or limitations regarding coverage of preexisting conditions or health benefits (such as hospitalization, emergency services, maternity care, preventive care, prescription drugs, and mental health and substance use disorder services). Your policy might also have lifetime and/or annual dollar limits on health benefits. If this coverage expires or you lose eligibility for this coverage, you might have to wait until an open enrollment period to get other health insurance coverage. This coverage is not “minimum essential coverage.”


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