Limits of Short Term Health Insurance
If you’re feeling overwhelmed by the high costs of Obamacare health plans – even high deductible ones – you might be intrigued by the lower premiums associated with many short term health insurance plans. Before you sign up for one of these policies, however, it’s important to understand what you’ll get in exchange for your premiums. In most cases, the premiums are lower because these plans provide limited coverage when compared to plans that are compliant with the Affordable Care Act.
ACA-compliant insurance plans cover many health conditions, even if you developed them before you subscribed to that particular plan. That’s not the case with temporary health insurance plans. If you have sought medical treatment for a condition in the recent past, your short-term plan probably won’t cover anything related to it.
Each company has its own definition of how recent is too recent for coverage. Some plans will say that any problems you had in the last year are considered pre-existing. Others may go back as far as five years. Don’t think that if you didn’t go to the doctor for an issue, then it won’t count as a pre-existing condition. If the insurance company rules that you should have sought treatment for a problem sooner, then they can count it as pre-existing and deny any related claims.
Keep in mind that short term plans are medically underwritten. If you have a pre-existing condition, you may not even be approved for a short term plan in the first place. At least one insurer has mentioned introducing limited coverage for pre-existing conditions, but this isn’t the norm. Short term plans don’t typically cover anything related to an existing medical problem, such as diabetes, heart disease or even pregnancy.
ACA legislation outlines essential services that all compliant insurance plans must cover. Short term health plans are not subject to that legislation, so their coverage is rarely as comprehensive. Many plans do not cover prescription drugs. You may have access to a discount card through which you can save money at the pharmacy, but the cost of medication may not count toward your deductible or out-of-pocket spending. Coverage for certain health situations may not be included in a temporary health insurance plan. Maternity coverage is commonly excluded. A short term plan probably won’t pay for treatment for mental health conditions or rehab services for substance abuse.
ACA-compliant plans give subscribers access to free preventive care, even before they reach their annual deductible. That includes routine screenings for cancer, annual wellness visits, and immunizations for you and your kids. With a short term health plan, it can be quite the opposite: Preventive care may not be covered by the plan at all.
Surprisingly, some plan limits also include fine print about the days on which you can receive certain services. For example, a plan may cover hospital stays that begin on a Monday but not those that begin on a Friday. Although emergencies might be considered an exception to that rule, your situation would have to meet the insurance company’s definition of an emergency in order to qualify for coverage. In short, short term health plans come with plenty of caveats in terms of coverage.
Even if you have a medical situation that qualifies for coverage under the rules and regulations of your short term health plan, that doesn’t guarantee that your insurance company will cover the full cost of your medical care. Most short-term health plans place a cap on benefits. Once you reach the maximum payout allowed by your plan, you are responsible for any remaining medical costs.
Many plans have an annual payout limit, and for those people who renew their temporary health plans year after year, they also have a lifetime maximum benefit. Although there are plans with caps of $1 million or more, others have limits as low as $250,000. In a major health crisis, it doesn’t take long for bills to soar right past that amount.
If you are young and healthy and expect to stay that way for the foreseeable future, you may not need all of the coverage that’s offered by a major medical plan that meets the ACA’s definition of minimum essential coverage. You may be able to get sufficient coverage for your needs and save on premiums by enrolling in a temporary health plan. You might also benefit from one of these plans if you need to fill in a gap between more robust health plans. Just be sure to read the fine print before you sign on the dotted line so that you don’t end up surprised by what is and isn’t covered.