Can short term medical become a long term solution?

This post has been updated 8/2/2017

Short term medical plans have been around forever.  As a licensed insurance counselor, I have used it as a great tool for recent college grads or folks in between jobs.  There were even times I would get a call from a client in some financial distress or cash flow crunch wanting to cancel their health insurance.  Lets face it.  Insurance is intangible and almost every family considers themselves “healthy.”  I would try to inform them of other options to consider rather than being 100% self insured.  Heck, something is better than nothing, right?

EFFECTIVE 4/1/17 carriers are not allowed to offer short term coverage lasting more than 90 days (this might change & some talk of carriers stacking plans)

My favorite tool to cut current health insurance premiums in half and still keep health insurance coverage would be short term medical.  One of my clients realized the benefits of this strategy firsthand, when after starting a short term medical plan a few months later his daughter was diagnosed with Non-Hodgkin’s lymphoma while a freshman in college.  The short term carrier paid like a champ because this Dx was not a pre-existing situation.  In other words, there were no signs, symptoms, treatments of this medical situation before they purchased the short term policy.  My client was able to get this very stressful and expensive medical situation covered and then eventually jump onto a guaranteed issue policy.  Fast forward 4 years to today, the story has a great ending because my client is not bankrupt and his daughter just graduated from college and is starting her post-cancer care.  Praise The Lord and thank goodness my client had Short Term Medical.

short-term

The huge risk with short term medical in the past would be something big bad and ugly could happen during the short term period (typically 6-11 months) and that person becomes “uninsurable” and cannot re-apply for another short term period or qualify for an individual health policy for that matter.  Now there are multiple options with group coverage and guaranteed issues plans in the marketplace.  No more pesky medical questions.

So what is the catch?

Short term medical is not for everyone.

1.  There are medical questions so if you do not qualify then the carrier can say, “No Thanks!”  Kinda like individual health insurance was in the past before ACA.  This keeps the premiums low for for everyone else.  Here is one sample of medical questions.  So if you are in really in poor health or just have some health challenges then it is might not be a fit.

2.  You are currently on expensive Rx.  This is easy to figure out.  Warning do not just go by what you pay at the pharmacy.  Real cost of Rx is hidden by copays.  Use this great data source as an easy way to see the real cost of your current Rx.  GoodRx.com

3.  Wellness is pretty much all you.  One of the essential benefits all ACA plans is that these plans must have it to pay for wellness type events.  Think well woman, well baby, colonoscopies for 50+ year olds.  Short Term medical plans do not have to pay for these expenses so those cost are thrown back to the individual.

4.  No ACA (Obamacare) stamp of approval.  Technically these plans do not meet the ACA “individual mandate.”  The good news is many people can qualify for a waiver or exemption.  The Marketplace publishes exemptions and explains how you might avoid the penalty.  Also, the math along with the premium savings could still make sense even with a penalty.  Talk to your CPA and use a calculator if needed.

5.  Coverage limits for short term medical usually stop at $1,000,000 so if you are comforted by a gazillion dollars worth of medical coverage then short term is not for you.

6.  Pre-existing conditions are not covered.  If a reasonable person would have noticed any signs, symptoms, taken medication, or sought medical treatment for it BEFORE you purchase the plan then it is not covered.  Many times PreX is not that big of an issue if the client is willing to take the risk.  Example: I have a little back issue that gives me trouble but there is really nothing that can be done.  I do take some Rx so that would be all me under a short term medical plan.  If you have no Pre-X issues then that is an even better situation.

Enough of the negatives.  How about the positives to a short term medical strategy.

Premium savings can be huge.  I just completed a case that my client is saving over $6000 annually and he reduced his deductible down to $1000 with 100% coinsurance so after a $1000 deductible he pays nothing.  He actually lowered his risk and lowered his premium.  Last time I checked, $6000 annually is a lot of money over the long haul.

Timing is everything.  In a perfect world, your short term plan would end when the open enrollment season is open.  In other words, make sure that if you have to jump onto a guaranteed issue plan you have that option.  2016 open enrollment begins 11/1/2015 for a 1/1/16 effective date.  Now there are some carriers that will count a short term medical plan expiring as a “Special enrollment Life event.”  SEPs trigger an enrollment event anytime of the year so it does not have to be open enrollment season.  There are also many other life events that qualify.  Not to mention group open enrollments.

The fact is Short Term Medical coverage can be really good fit if not better than your current coverage for many people.

Copays for Doctor visits, copays for Urgent Care visits can be included in some short term plans.  Huge PPO networks are some highlights of just one carrier in Texas.

A leader in Short Term Coverage has always been United Healthcare.

VIEW UHC STM Quotes

Every situation is unique so be sure to talk to an expert before jumping off into a new strategy.  I am seeing family coverages through employers go through the roof as far as cost.  Perhaps short term coverage could empower someone to jump off a group family coverage and switch to employee only or employee plus children saving thousands of dollars.

It never hurts to check out all of your options.

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