Waiting Periods for Short Term Health Insurance
In your research regarding health insurance, you may have come across the concept of waiting periods. With regular insurance (i.e. major medical plans), waiting periods help prevent the practice of people signing up for coverage only when they need it because they’re sick or injured, and then dropping it once they’ve had treatments. It’s why open enrollment exists, and it’s a method to keep costs down for everyone with insurance. If you buy a plan in November, your coverage starts in January. If you wait until after a certain date in December, your coverage could be delayed until February. Medicare also imposes waiting periods. Most insurance does.
But the same isn’t true of short term medical, also known as temporary or short term health insurance. The waiting periods here – the time between when you buy a plan and when coverage takes effect – are negligible. In fact, many plans promise next-day coverage. Short to nonexistent waiting periods make short term plans more attractive to consumers. Nonetheless, there are other aspects of these policies that you should consider before buying in.
The Waiting Game
Let’s say a factory worker in Ohio has health insurance coverage by virtue of her full-time employment, which provides her with prescription medication and physical therapy for a repetitive motion strain condition. If this worker decides to leave the factory to go in search of a new job, she may have to wait three months before her new employer starts providing coverage. This is what is known as the waiting period, and it can last up to 90 days for group health insurance (the kind you get from an employer) under the provisions of Obamacare. One of the initial drafts of the ACA called for this period to last between 30 and 60 days, which eventually became 90 days as a means of compromise between lawmakers.
Being left without health insurance is a medical and financial gamble. Every day that you have to wait until new coverage goes into effect can turn into a nerve-racking affair because of the possibility of injury or illness, which may result in clinic or hospital visits along with other medical expenses that become out-of-pocket expenses. In the case of the aforementioned factory worker, she would also have to pay for her physical therapy sessions and prescription medications out of pocket.
A short-term health plan can help bridge the gap created by waiting periods. Once you complete the application and submit your premium, coverage typically starts within 24 hours of the requested date. Now, in the case of our factory worker, she likely wouldn’t qualify to have any of her bills covered because her issue was pre-existing.
But suppose she only discovered her motion strain after she had already left work and was without insurance. If she had bought a temporary plan in the interim, any new medical problems that she discovered during the gap in coverage would have been covered by the short term plan. That’s what temporary health insurance is designed for – bridging a gap between major medical policies.
Instant Coverage with Some Caveats
The Trump administration recently proposed changes to the healthcare law that would allow short term health plans to last up to 12 months again, essentially returning to the way things were before 2016 when the Obama administration capped short term policies at three months. This rule would give greater flexibility to people who need a temporary plan while waiting for major medical insurance. But despite quick approval, a negligible waiting period for coverage to start and low premiums, short term health plans come with some caveats, such as:
- Short term health plans do not count towards the individual mandate provision of the ACA, which means that people covered by these policies would still be subject to the IRS penalties for not participating in Obamacare – until 2019, when that penalty gets eliminated.
- These plans are not subject to ACA standards or regulations, meaning they won’t protect you like a major medical plan would, you won’t have coverage for a host of standard benefits (like preventive care, maternity care, prescriptions or mental health services) and you can be denied coverage based on pre-existing conditions.
Final rules on the marketing of short term insurance products are still being ironed out. There is a chance that their effective coverage terms may not exceed six months, and that insurers will have to be very transparent about the coverage limits. These plans are not meant to replace Obamacare plans since they essentially offer less coverage but at much more affordable premiums.
The bottom line of short-term health coverage is that it can be convenient and cost-effective for bridging the gap caused by Obamacare waiting periods and employer plans, but they should not be viewed as comprehensive coverage because that is not their purpose.