Understanding the Pros and Cons of Short Term Insurance

Posted : August 12, 2017

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Keyword(s): short term insurance

One of the biggest complaints of the Affordable Care Act (ACA) is the ever-increasing premium costs. But what if you could get a health plan for much cheaper without needing the government to pass a whole new healthcare law? That's where short term insurance comes in.

If you're a recent college graduate or in-between jobs, short term insurance offers lower premium costs than more comprehensive health plans aligning with the Affordable Care Act.

Since short term insurance does not cover everything required by the ACA, you might be thinking - is this the right health plan for you? Read on to learn about both the pros and cons of short-term insurance.

Pro: Offers a coverage gap between long-term health plans

If you find yourself unemployed and between jobs, you may want to consider a short-term insurance plan before signing up for more long-term coverage through an ACA exchange or at a new job.

Sometimes a new employer will offer coverage only after three months or so and you'll still need health insurance. During this gap, short term insurance could keep you safe in case of emergency.

Pro: Premium costs lower than traditional health plans

In 2015, the average premium cost of short term insurance plans sold in California by the company eHealth was $177 per month.

This is a much lower premium cost than the second lowest cost silver health plans available on state health insurance exchanges. As of 2017, these silver plans vary from $904 per month in Alaska to $456 in New York and $237 per month in Michigan, according to the Kaiser Family Foundation.

If you're a relatively healthy and young person looking to save money on health care, short term insurance might be right for you.

Con: Pre-existing conditions won't be covered

When vendors of short term health plans consider applicants, they may reject those with pre-existing conditions and a poor health status or restrict coverage by not paying for the treatment of a pre-existing condition.

Since these health plans don't need to meet the requirements of the Affordable Care Act, individuals with serious medical concerns may want to steer clear and purchase traditional, long-term health plans.

It's also important to note that short-term insurance consumers will face a tax penalty because these plans don't align with Affordable Care Act requirements.

Con: Short term insurance doesn't cover essential health benefits

If you purchase short-term health insurance, you will likely not have coverage that pays for all of the essential health benefits under the Affordable Care Act. It may cover some but not all of these benefits.

According to HealthCare.gov, the ACA requires insurers to cover 10 essential health benefits including maternity care, mental health services, emergency room visits, lab tests, and prescription drugs.

If you purchase short-term health plans, you may not be eligible for maternity care and preventive services like cancer screenings or vaccines. Before signing up for a new health plan, be sure to consider the pros and cons of the insurance.

If you have more questions about short term insurance plans, please contact us or leave a comment below!