Short Term Health Insurance vs. Major Medical Coverage
What is Short Term Health Insurance?
Short Term health insurance, which is sometimes called "temp care" or "term health insurance", is designed to help bridge gaps in your health insurance coverage during times of transition. Short Term health insurance plans can run from 30 - 90 days per policy, and can sometimes be bought in policy bundles of 2 - 4 (90 day policies) which can provide continuous coverage from 180-360 days without having to reapply for a short term plan. Short Term health plans on average cost 70% cheaper than major medical health insurance plans in Nebraska & Iowa. There is no annual enrollment window for short term plans, and coverage can usually start next day.
Short Term health insurance plans do NOT cover pre-existing conditions or preventive care (wellness exams). There are additional exclusion that may apply to your coverage depending on the short term health insurance company you enroll with. Most Short Term health plan applications include 5-10 simple health based underwriting questions to determine your eligibility to enroll.
The Tax Cut and Jobs Act of 2017 ("tax act") goes into effect Jan 1, 2018, however, provisions of the Tax Act that affect healthcare coverage under the Affordable Care Act are delayed until 2019. This means that for the 2018 plans year, Short Term health plans are not considered "qualified plans". Enrollment in a non-qualified health insurance plan in 2018 could mean the individual mandate "no insurance tax penalty" may apply.
What is Major Medical Health Insurance
When you think of health insurance, often the type of plan that comes to mind is major medical coverage. The majority of the U.S. population obtains major medical coverage through their employer, called "group health insurance". Others receive coverage through Medicaid / Medicare. Those who are left to purchase their own health insurance coverage have the option of signing up for individual major medical insurance.
Those enrolled with individual major medical coverage have insurance benefits similar to those enrolled on employer group health insurance. Major medical plans can be purchased through the health insurance marketplace on (healthcare.gov) or "off-market" with a participating health insurance company. Major medical plans include consumer protections and essential health benefits. The most popular protections and essential benefits included with major medical plans is coverage for pre-existing conditions/no waiting period, and coverage for preventive care (wellness exams) at 100% no cost to the policy holder.
The Affordable Care Act established an annual open enrollment period for individuals to enroll in major medical plans, whether that be through www.healthcare.gov or (off-market) with a health insurance company directly. The open enrollment period for 2018 health insurance coverage ran from November 1, 2017 - December 15, 2017 for plans beginning January 1, 2018.
Which Coverage is Right for Me?
This question is a hot topic of debate among insurance professionals nationwide. The opinions below are solely based off the author's experience with enrolling hundreds of individual clients in Nebraska & Iowa.
We ALWAYS review major medical insurance options on the health insurance marketplace as a starting point for every client. We review household size and income to determine subsidy eligibility. About 50% of our clients qualify for sizable subsidies from the health insurance marketplace that significantly reduce the cost of major medical plans, and roughly 1/2 of those receiving a subsidy qualify for a zero cost Bronze plan. In these situations, we highly recommend enrolling in a major medical plan on the health insurance marketplace. Many others who don't qualify for a subsidy, but need coverage for pre-existing condition treatments, generally enroll (off-market) with a major medical health insurance company at full cost.
So, what if you don't qualify for a marketplace subsidy or need coverage for pre-existing conditions? This is where Short Term health insurance plans have become very popular for 2018.
From a monthly premium cost approach, let's review a few examples:
Age 35 (zip: Omaha, NE 68116):
$508 per month - $6000 deductible (lowest cost major medical option)
$92 per month - $2500 deductible (average cost short term option)
How about your average early retiree - Age 60 (zip: Omaha, NE 68116)
$1129 per month - $6000 deductible (lowest cost major medical option)
$262 per month - $2500 deductible (average cost short term option)
You can easily notice the significant premium difference between short term health insurance plans and major medical insurance coverage. The average consumer saves around 70% by enrolling in short term coverage. Although the individual mandate penalty (choosing a non-qualified plan) may still apply to some consumers, the short term health plan strategy will normally exceed 50% savings after the penalty is taken into consideration.
Although short term health plans were never meant to be a long term solution to secure your individual health insurance needs, we recognize that a combination of 5 different major medical insurance companies have discontinued offering coverage in Nebraska & Iowa alone in just the last 4 years. Because of this, individual health insurance options must be thoroughly reviewed on an annual basis.
The team at Strategic Benefit Consultants is here to assist in reviewing both short term health plans and major medical coverage options. For a no obligation health insurance quote you may reach us at:
Phone: (402) 740-7484