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How Short-Term Health Insurance Plans Work

Jun 26, 2020 3 min read Zina Kumok

It's a pretty common scenario: You lose your job and find yourself without health insurance. Without a reliable income, you can't afford to buy a new plan on the marketplace. So, what can you do to be covered while you search for a new job?

Short-term health insurance plans are one option, but they come with some drawbacks you may not be aware of. Here are some questions to ask before enrolling.

 

 

What does it cover?

Unlike an employer-sponsored insurance plan or a health care marketplace plan, short-term health insurance plans don't cover the 10 essential health benefits found in most insurance plans. That means a short-term plan does not count as minimum essential coverage (MEC).

It may surprise you to find out what short-term health plans don't cover. A 2018 study from the Kaiser Family Foundation found that none of the short-term health plans available covered maternity care Opens in new window. If you get pregnant while on one of these plans, you'll have to pay for prenatal visits and testing out of pocket until you switch to a traditional plan.

Consumers opt for short-term health plans if they're in between enrollment periods. If you quit your job and are looking for work, for instance, you may not be able to afford a plan from the health care marketplace.

A short-term plan can provide peace of mind in the period before you become eligible for employer-sponsored coverage. These plans are designed to bridge the gap between traditional insurance plans, not to be a substitute for coverage that complies with the Affordable Care Act.

According to the Center on Budget and Policy Priorities Opens in new window, not all states allow short-term plans, including California and New York. Some other states have strict regulations on short-term coverage. In eligible states, you can buy short-term health plans directly from health insurance companies.

 

How long does it last?

The minimum coverage period is generally 30 days. The Affordable Care Act (ACA) initially limited short-term health insurance plans to 90 days, but that restriction was amended to 364 days. Consumers can generally renew short-term plans, but the total length can't exceed 36 consecutive months.

Some states have stricter rules on how long short-term health plans can last and how many times a consumer can renew the plan. These supersede any national guidelines.

 

How much does it cost?

Because they don't cover as much as traditional insurance plans, short-term health plans have much cheaper premiums. Some reports, including one by the Kaiser Family Foundation, claim that short-term premiums are about 20% less than the least expensive plan Opens in new window on the health care marketplace.

On the other hand, someone with short-term coverage could find themselves paying more out of pocket because their plan doesn't cover prescriptions or visits to a therapist. These plans also tend to exclude dental and vision coverage.

 

When can you enroll?

You can enroll in a short-term plan at any time. Unlike regular health insurance that has a specific open enrollment period, short-term health plans are available year-round. Check to see if your state allows short-term health plans or has limits on how long you can be covered by one.

Footnotes

Zina Kumok is a freelance writer specializing in personal finance. She has written for the Associated Press, Indianapolis Monthly and more. She also writes a blog about how she paid off her student loans in three years.

 

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