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The basics of short-term health insurance

Short-term health insurance is the ticket for people in transition.

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Designed for healthy individuals and families, short-term policies can provide an affordable safety net for those who are transitioning from one life event to another without a basic health plan. Depending on the short-term plan, benefits can be wide-ranging, with some policies providing up to $5 million in individual coverage.

Short-term health insurance is the ticket for people in transition

Just as the name implies, these health insurance policies are a temporary solution to a short-term insurance gap.

Most plans last one to six months and can be renewed for a total of 36 months. The application process is simple and policies can be issued the next day. Most insurers take credit card payments.

The most important thing to remember is that a short-term plan is not designed to cover pre-existing conditions. These are typically defined as any condition you had during the 36-month period prior to the start of coverage. The "look-back" period for these conditions can vary by state. The insurance department in your state can tell you what laws apply.

It's important to answer the health questions on the application honestly. Otherwise, you could wind up with a denial of any treatment related to your pre-existing condition.

All short-term policies have very specific limitations and exclusions, so read the policy carefully before you buy.

Who needs short-term health insurance?

Individuals who are temporarily out of work:

Folks who are between jobs make up a large market for short-term health insurance.

Employees who are newly hired:

If you have just started a new job, you may be waiting to become eligible for your company’s group health plan. This can take one to six months after your start date. In order to avoid a lapse in coverage, short-term health insurance can fill the gap.

Recent college graduates:

Many grads look for jobs offering health insurance benefits, but until they land full-time jobs, short-term insurance can fill the gap.

People waiting to qualify for a standard health insurance policy:

People applying for private-market individual health policies may not want to go without coverage while they wait for their applications to be approved. Having a short-term health insurance plan in place while you wait provides a seamless transition, and if you are denied for your standard policy, you still have basic health coverage through your short-term plan.

Those losing dependent status:

If you reach the cut-off age of your parents' health insurance plan and are not enrolled as a full-time student, you will be dropped. In this case, you may be eligible for COBRA, but premiums can be very high. A short-term policy can keep you insured at lower premiums until you find a job that offers health insurance, or you enroll in an individual health plan.

People on strike, military discharge and early retirees:

You might consider a short-term plan if you are temporarily without insurance for some other reason. If you have retired early, you may need coverage until you qualify for Medicare. See other health insurance options for early retirees.

How does it work?

Already sick?

If you're uninsured and sick, you may feel locked out of the health insurance market. And while it's true that it may seem impossible — or unaffordable — to buy health insurance when you have a "pre-existing condition," there are practical ways you may be able to get coverage:
12 ways to get health insurance if you're already sick

A short-term health insurance policy works like an "indemnity" plan, giving you the freedom to go to any doctor or specialist you like. However, most plans require that you obtain pre-certification from your insurer before you are hospitalized (except for emergency treatment). Without pre-certification, the plan may not reimburse you for hospital bills.

Surgery, hospital care, emergency services, diagnostic tests, prescription drugs, follow-up office visits and even limited mental health care could be included under a short-term health policy.

While many short-term policies are usually renewable for a total of 36 months, keep in mind that if you file a claim under your short-term policy your insurer will likely not renew the policy again. They might offer you another policy, but they will treat any injuries or illnesses that occurred during your previous short-term policy as a pre-existing condition.

Most reputable insurers offer a 30-day guarantee of satisfaction and will refund 100 percent of your premium within this time should you decide you don't want the policy after all. In order to get your money back, you can’t have made claims under the policy.

What will it cost me?

Low premiums are an important perk to a short-term health insurance policy.

Short-term health insurers have established pools of healthy people and families, each of whom will need coverage only for a short period. Given the low-risk characteristics of this group, the cost of insurance remains low for everybody because insurers expect few claims.

For example, a healthy, single male nonsmoker under the age of 30 could pay about $150 a month. A healthy, single female nonsmoker can likely find a policy for $140 a month. For those over age 30, premiums are slightly higher.

With some short-term policies, you pay a deductible on a per-injury or per-illness basis. After you've met your deductible, most insurers will pay some portion, typically 50 to 80 percent of the next $5,000 of expenses, and then 100 percent coverage kicks in, up to the plan maximum.

Many short-term plans will allow you to pay your premiums up-front (often with a discount for doing so) or on a monthly basis. Major companies offering short-term health insurance include Aetna, Blue Cross Blue Shield, CIGNA and United Heathcare’s Golden Rule.

Advantages of short-term health insurance plans:

 

Tip

HIPAA imposes limits on the extent to which some group health plans can exclude coverage for pre-existing conditions. For instance, if you've had "creditable" health insurance for 12 straight months, with no lapse in coverage of 63 days or more, a new group health plan cannot exclude your pre-existing conditions. It must cover your medical problems as soon as you enroll in the plan. See the HIPAA law: Your rights to health insurance portability.

 

 

 

 

 

  • Short-term medical coverage is less expensive than traditional medical coverage. If you're in an accident, have an injury or have to be hospitalized due to pneumonia or other illness, this policy would cover you for treatment. Without a short-term health insurance policy, your out-of-pocket expenses for a visit to the hospital could deal a severe financial blow.
  • Plans can be used with any doctor or hospital in the U.S., and there is no physician network in which you must stay.
  • Some insurers provide a "Certificate of Creditable Coverage" to be used with your next employer's health insurance policy. This guarantees that your new group coverage cannot exclude your pre-existing medical conditions. For more on this, read about the HIPAA law.
  • It will cover you the day after you postmark the application.
  • Some plans cover preventive care such as mammograms and PAP smears. These things will be listed on your policy.
  • Plans cover certain transplants.
  • All eligible dependents such as your spouse and children can be covered.
  • Some plans cover home health care such as a health aide or services from a registered nurse.

 

    Disadvantages

    • While short-term plans can prevent you from having a coverage gap and losing your HIPAA rights, short-term plans themselves are exempt from HIPAA. That means pre-existing conditions are not covered.
    • Policies cannot be renewed beyond a certain point. Although you can reapply, there is no guarantee that you will qualify for another short-term policy.
    • There is no dental or vision coverage.
    • Plans don't cover pregnancy and childbirth.
    • If you develop a serious condition after your coverage goes into effect, you may not qualify for another plan after your policy period expires.

    Who is ineligible?

    Tip

    Another way to buy health insurance when you're between group health plans is through a catastrophic health insurance plan.

    Most insurers sell short-term health policies only to people under age 65. And if you have ever been denied health insurance, you may not qualify for short-term insurance.

    You shouldn't buy short-term health insurance if you are already covered by another policy. Each short-term health plan application asks a number of questions about other available coverage to determine which plan will pay first. Carrying double coverage may not be a value for your money.

    You must meet acceptance guidelines, usually including acceptable height and weight.

    Your state’s insurance department can provide a list of companies offering temporary or short-term health insurance policies.

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