The Flexibility Of Short-Term Insurance: Why It's Worth Considering For Your Yearly Plans

Short-term health insurance is a temporary safety net for those who can't afford long-term insurance plans. It is often a fraction of the cost of long-term insurance and can be purchased at any time, with coverage starting as soon as the next day. However, short-term plans are not subject to the same regulations as ACA-compliant plans and so do not cover pre-existing conditions or offer the same comprehensive coverage. Short-term plans are also not eligible for premium subsidies, which may be available with ACA-compliant plans.

You missed the open enrollment period for ACA-compliant plans

If you missed the ACA open enrollment period, you may be out of luck. However, there are some exceptions that will allow you to enroll outside of the open enrollment period. Firstly, Medicaid/CHIP enrollment is available year-round for those who qualify. If your income drops to a Medicaid-eligible level, you can enroll at that point. Similarly, if you are on Medicaid and your income increases to a level that makes you ineligible, you can switch to a private plan. Secondly, there are some state-run programs with year-round enrollment, including the Basic Health Programs in New York and Minnesota, the ConnectorCare program in Massachusetts, and the Covered Connecticut program. Thirdly, if you have a qualifying event during the year, you will have access to a special enrollment period. Qualifying events include marriage, the birth or adoption of a child, loss of other minimum essential coverage, or a permanent move to a new geographical area. Finally, if you are an American Indian or Alaskan Native, you can enroll in plans through the exchange year-round.

You are in an employer waiting period for health insurance benefits

If you're in an employer waiting period for health insurance benefits, you might be wondering whether you should enrol in short-term insurance for a year. Here are some things to consider:

Understanding the Waiting Period

A waiting period is a block of time individuals must wait before accessing company benefits, such as health insurance. This period is often used by employers to prevent "hit and run" behaviour by new employees, where they file a large claim and then quickly leave the company. The maximum waiting period for health insurance benefits is typically 90 days, and this period usually begins from the employee's start date. During this time, it's important to have alternative health insurance in place to avoid a lapse in coverage.

Short-Term Health Insurance as an Option

Short-term health insurance offers temporary coverage for those who can't afford or access other types of health insurance. It is not regulated by the Affordable Care Act (ACA) and thus does not cover pre-existing conditions or the essential health benefits mandated by the ACA. Short-term plans also tend to have benefit maximums and can result in high out-of-pocket costs if extensive medical care is needed. However, short-term plans have lower premiums and can be purchased at any time, without having to wait for an open enrollment period.

Weighing the Pros and Cons

Enrolling in short-term insurance during an employer waiting period can provide peace of mind and protect your finances in case of unexpected medical emergencies. It can be especially useful if you don't have any existing health insurance coverage or if you anticipate significant medical expenses during the waiting period. However, short-term insurance may not offer comprehensive coverage, and you may still be responsible for a significant portion of the medical costs. Additionally, short-term plans are temporary and may not cover you for the entire waiting period, depending on their duration.

Alternative Options

If you're concerned about the limitations of short-term insurance, there are other options to consider:

• COBRA insurance: If you previously had health insurance through another employer, you may be able to continue that coverage temporarily through COBRA, although it may be more expensive.
• Marketplace plans: Losing insurance is considered a qualifying life event, so you may be able to enrol in a plan through the healthcare marketplace outside of the open enrollment period.
• Other types of insurance: Depending on your circumstances, you may want to explore options like accident supplements, critical illness insurance, or health care sharing ministry plans.

In conclusion, while short-term insurance can be a viable option during an employer waiting period for health insurance benefits, it's important to carefully consider your needs, understand the limitations, and explore alternative options to make an informed decision.

You are retiring early and do not yet qualify for Medicare

If you're retiring early and don't yet qualify for Medicare, you have a few options to consider for health insurance coverage.

COBRA

The Consolidated Omnibus Budget Reconciliation Act, or COBRA, allows you to stay on your employer's health insurance plan for a limited time after leaving your job. This is typically for up to 18 months, but there are some cases where it can be extended for up to 36 months. With COBRA, you won't have to worry about changes to your coverage or your network of doctors and pharmacies. However, it can be expensive since you'll have to pay the full premium yourself.

Spouse's Plan

If your spouse is employed and has an employer-sponsored health plan, you may be able to be added to their policy. This could be a more cost-effective option, depending on the employer's policy for partner and family coverage.

Health Insurance Marketplace

The Affordable Care Act (ACA) health insurance exchange can provide access to affordable health insurance, even if you have a pre-existing medical condition. ACA plans must provide ten essential health benefits, including preventive care, mental health services, and prescription drug coverage. You may be eligible for a premium tax credit, which can help with monthly insurance premiums or provide a tax benefit when filing your taxes.

Private Health Insurance

You can also purchase private health insurance directly from insurance companies or through a broker. These plans are often more expensive, and you won't have access to premium tax credits available through the ACA. Additionally, these plans may have higher deductibles and offer less comprehensive coverage compared to other options.

Short-Term Health Insurance

Short-term health insurance is an option available in most states. It is a cheaper alternative to buying an individual or family health insurance policy and can help bridge the gap until you qualify for Medicare. However, these plans offer significantly less comprehensive coverage than marketplace health insurance plans. Short-term health insurance typically does not cover the ten essential benefits required by the Affordable Care Act, and many benefits offered by more comprehensive plans, such as chronic conditions, pregnancy, mental health, and substance abuse treatment, are usually excluded. Additionally, short-term plans often have lower limits on the total amount they will pay, and they may have limitations on renewals or coverage periods. While this option offers less comprehensive coverage, it can help protect against steep healthcare bills in certain worst-case scenarios, such as accidents or unforeseen illnesses, before you qualify for Medicare.

You are in between job-based health insurance plans

If you are in between job-based health insurance plans, you may be tempted to wait it out and remain uninsured. However, this can be risky as unexpected medical bills can break the bank. Short-term health insurance can help protect your finances when you don't have an Affordable Care Act (ACA) or Obamacare health insurance plan. Here are some reasons why short-term health insurance may be a good option for you:

Filling the Gap Between Employer Coverage

Even if you think you'll land a job with benefits right away, it is wise to secure temporary health insurance coverage. Short-term health insurance premiums are often much lower than those of major medical insurance policies. Plans usually include benefits related to inpatient and outpatient hospital care, emergency room visits, surgical services, and intensive care, among other things. Additionally, depending on your state's laws, you can typically apply for and enroll in a new policy if you reach the end of your policy and still need coverage.

During an Employer Waiting Period

In some jobs, the waiting period before new employees become eligible for employer-sponsored health insurance benefits may be as long as 90 days. A single month of short-term health insurance can be well worth the premium, often costing only one-third of what a major medical health insurance policy costs. There is no waiting period to begin, and coverage typically starts within 24 hours after you pay your initial monthly premium.

After Missing Open Enrollment

If you missed the Open Enrollment Period, you don't have to spend a whole year uninsured. Enrolling in a short-term medical plan can get you to the next year or until a change in circumstances allows you to secure major medical health insurance. While short-term health insurance plans are not compliant with Obamacare's requirements, this coverage can offer some peace of mind and help pay for covered medical expenses in case of an emergency.

While Waiting for Special Enrollment Coverage to Begin

Qualifying life events such as turning 26, getting married or divorced, adding a child to your family, or being a survivor of domestic abuse can make you eligible for a special enrollment period. This typically allows you 60 days to secure ACA health insurance, even outside of the open enrollment period. However, depending on when you enroll, your start date could be more than a month away. Picking up a short-term health plan can help ensure you stay protected in the meantime.

Before Medicare Eligibility After Early Retirement

If you retire early, there may be a gap between your retirement and your Medicare eligibility. A short-term health insurance plan can help cover this period. This is especially relevant when one spouse qualifies for Medicare but the other, younger spouse needs a plan until Medicare is available. It is important to note that temporary coverage may not be an option if you have pre-existing conditions.

Short-term health insurance plans have their disadvantages, including limited coverage and higher out-of-pocket costs. Additionally, they are not regulated by the ACA, so they can deny coverage based on pre-existing conditions and do not cover essential health benefits. Starting in September 2024, the total duration of short-term plans will be limited to four months, including renewals. Despite these drawbacks, short-term health insurance can be a good option for those in between job-based health insurance plans, as it provides temporary coverage at a lower cost.

You are exempt from Obamacare

If you are exempt from Obamacare, you are not required to purchase health insurance or pay a penalty fee for non-compliance. Here are four to six paragraphs explaining this exemption in detail:

No Penalty for Non-Compliance

As of 2019, there is no longer a tax penalty for not having health insurance. This means that even if you are not exempt from Obamacare, you will not be penalised for not purchasing health coverage. However, it is important to note that this does not apply to certain states, which have their own individual mandates and corresponding penalties.

Exemptions Based on Income

If your income is very low, you are automatically exempt from the requirement to purchase health insurance. For example, if your income is below the IRS threshold for filing taxes, you are not required to pay the annual penalty fee. Additionally, if the cost of a marketplace or job-based insurance plan exceeds 8.16% of your household income, you are also exempt from the individual mandate.

Hardship Exemptions

Hardship exemptions are available for those facing financial difficulties or other challenging circumstances. These exemptions cover a broad range of situations, such as bankruptcy, recent domestic violence, death of a close family member, utility shut-off notices, eviction or foreclosure, substantial property damage due to natural disasters, and high medical expenses.

Membership-based Exemptions

Membership in certain groups also qualifies you for an exemption. This includes members of federally recognised Native American tribes, individuals eligible for Indian Health Services, members of recognised religious sects that object to insurance, and members of approved health care sharing ministries.

Exemptions Based on Legal Status

Your legal status can also determine your exemption from Obamacare. If you are not a US citizen, national, or lawfully present in the country, you are exempt from the requirement to purchase health insurance. Additionally, individuals who are incarcerated are also exempt, regardless of whether they are serving a sentence or awaiting trial.

Frequently asked questions