Generally speaking, buying Short Term health insurance costs less per month than buying an Affordable Care Act (ACA) plan, making Short Term seem like a more affordable health insurance option. However, saying Short Term insurance is cheap health insurance and ACA plans are expensive health insurance based only on monthly premium cost is too simple.
Short-Term health insurance and longer term ACA plans are different products for different situations. To determine if a temporary health insurance plan is a good option for you and your family, you need to consider a number of cost issues.
The first and last thing to remember is this: Short-Term insurance plans don’t meet the minimum essential coverage (MEC) standards of the ACA, also known as Obamacare. They are designed solely to provide temporary health insurance during unexpected coverage gaps.
That said, having Short-Term insurance used to mean you were subject to a federal penalty for not having MEC. However, as of 2019, there is no longer a federal tax penalty for not having MEC. That extra federal cost for having Short-Term health insurance is now gone. Penalties may vary by state. Consult your tax advisor for more information.
You may be giving up on help by choosing a Short Term health insurance plan. If you get an ACA health plan, you may be eligible for help paying for your insurance in the form of:
In contrast, Short Term insurance plans do not qualify for any credits or subsidies.
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:
Although the federal tax penalty for not having minimum essential coverage no longer applies in 2019, you may still owe a payment when you file your taxes if you did not have minimum essential coverage for any month in 2018. Penalties may vary by state.
Seek out a qualified tax advisor if you think you might qualify for an exemption.
Once you have your Short Term health insurance plan in place, you need to understand four key concepts to keep an eye on your health care costs:
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.
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.
As you are shopping, remember that Short-Term insurance 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.5 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 ranging from under 3 months up to 360 days, depending on the state where you live.
So, while you may save money choosing Short Term, be sure you are paying for the right coverage for you before you buy.
1 This applies only if you choose Silver plan on the federal Health Insurance Marketplace or your state’s marketplace.
2 Lump sum savings apply only to the medical plan premium. Savings do not apply to premiums for optional benefits added to the medical plan.
3 Check your state’s plan brochure for more information.
4 Premiums do not count toward deductibles. Usually copays do not count toward deductibles. Check your plan brochure for more information.
5 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.”