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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.

Short Term Health Insurance Costs Versus ACA Plans

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

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.

No Credits or Subsidies with Short Term Health Insurance

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:

  • 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 insurance 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 health insurance 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 insurance 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

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.

After Your Premium: What You Pay For

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:

  • 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 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.

Want to learn more about Short Term health insurance?

Learn About Golden Rule Insurance Company Short Term Plans Check Out Short Term FAQs

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.”

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