Wednesday, September 2, 2020

Do I Need A Short Term Health Insurance Plan?

Everyday people all over the country start new jobs and are told they will have to wait 30, 60 or 90 days before their health insurance kicks in. Many of these people may have had to pay for their health insurance through COBRA, which carried their coverage over from their previous job. COBRA is not cheap and the employee may not be able to afford to keep it. On the other hand, the employee may not have any coverage at all and will have to wait, hoping not to get sick or hurt, for their new benefits to start.

Either way, there has to be a solution. Back in the pre-Obamacare days, we had a temporary solution called Short Term Health Insurance. It was designed specifically for those people who had lost coverage through work and had a gap in coverage until their new benefits could start. Unfortunately, when the new ACA rules became effective, short term plans did not qualify under the rules, which meant that tax penalties from the federal level could be levied. The Obama administration also put shorter limits on how long a temporary plan could cover people. 

In 2018, the Trump administration announced its intention to reinstate the previous time limits for temporary health plans. By making some changes in the mandate and tax penalties, short term plans became popular again. 

With all of this in mind, the question you may ask is if short term health insurance is for you. It may be if you are:

  • Not able to apply for the ACA plan during open enrollment or you did not qualify for a special enrollment period
  • Waiting for your ACA coverage to start
  • Looking for coverage to bridge you to Medicare
  • Turning 26 and coming off of your parents' insurance
  • Between jobs and waiting for your benefits to start at your new job
  • Are healthy and under 65 years old
Note that last bullet point. Unlike ACA plans, there is no coverage for pre-existing conditions. These plans are fully underwritten, so if you already have health problems these plans may not be a good fit for you. Also, they are limited in their coverage. You aren't going to find maternity coverage or a lot of prescription benefits here. Consider these plans to be a Band-Aid to help with major expenses while you are waiting to get on a employer sponsored plan or an ACA plan.

There are some benefits to these plans though. With short term health insurance you can:

  • Get covered fast, as soon as the day after application
  • Pick your deductible amount from several options
  • Pick your length of coverage, from 1 to 12 months, depending on your state
  • Drop your coverage with no penalty if permanent coverage becomes available
  • Apply for another short term plan when the first one ends if you need to
  • Have generally lower premiums
NOTE: Even though these plans are permissible from a "federal" level, state requirements may still vary, so check with your local agent. 

It is true that you may be able to save money with a short term health insurance plan. Just be sure to know what you are buying and that it is a good choice for you. For the right situation, short term health coverage can definitely provide fast, flexible, temporary health insurance coverage that fits your needs. 

If you have questions, drop us a note. We aren't licensed in each state but we hope we can point you in the right direction. 

Chris Castanes is the president of Surf Financial Brokers, helping people find affordable life and disability insurance coverage. He's also is a professional speaker helping sales people be more productive and efficient and has spoken to professional and civic organizations throughout the Southeast. And please subscribe to this blog!

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