Short-term health plan and major medical plan: Which one works for you.
If you want to understand short-term health insurance and how it works, a great place to start is with our new eBook, 3 Steps to Understanding Short-Term Health Insurance.
If you’re one of the countless Americans who missed open enrollment last year, you might have also purchased a short-term health insurance plan to hold you over until you were able to enroll in major medical coverage again.
While they do start quickly and are priced affordably, short-term health insurance plans do not provide you with the benefits or levels of coverage required by the Affordable Care Act (ACA).
Since they don’t meet the coverage requirements under the law, short-term plans may leave you open to penalties when you complete your federal tax return.
To help you decipher what’s happening with your health plan we’ve put together:
- An educational video, “Tips for people with short term health insurance”
- Top 6 things someone with a short-term health plan need to know,
- A chart depicting the differences between short-term insurance and major medical coverage
- Six frequently asked questions
“Tips for people with short term health insurance” Video
Top 6 things someone with a short-term health plan need to know:
1.Short-term health plans don’t protect you from tax penalties
Short-term health plans are designed to provide you with an affordable way to receive limited health coverage for short period of time when you’re not insured. But, they don’t meet all of the benefit standards of the Affordable Care Act, which means you could be subject to a tax penalty for being uninsured, even if you’re enrolled in a short-term health insurance plan.
2. Major medical health insurance may cost less than you think
Major medical individual and family health insurance plans can be more expensive than short-term plans because they offer more benefits. But, if you earn less than 400% of the federal poverty level (about $47,500 for a single person in 2016), you MAY qualify for a subsidy to lower your costs.
3. Open enrollment only comes around once a year, so get out there and shop
Open enrollment for ACA-compliant plans only comes around once each year. The 2017 open enrollment period for individual and family coverage starts on November 1, 2016 and is scheduled to end on January 31, 2017. If you don’t buy coverage during this period, you may be out of luck for the rest of 2017!
4. Short-term insurance isn’t guaranteed
You do have to apply for a short-term health plan each time you renew coverage, and insurers can decline your application, even if you’ve been approved for short-term coverage in the past.
5.Short-term insurance requires you to file your own claims
With a major medical health plan, your insurance company handles all of your billing and even negotiates prices for you with the health care provider.
6.The end of your short-term plan does not make you eligible for a major medical or “Obamacare” health plan
When your short-term health plan ends, you won’t automatically be able to buy a major medical health insurance plan. Without a qualifying life event, you’ll have to wait until the next open enrollment to be guaranteed access to health coverage. View the image below for detailed comparison between Major Medical Plans and Short Term Plans.
Frequently Asked Questions about Short Term Health Insurance
QUESTION: “How do I know if I have a health plan that meets new government standards?”
ANSWER: If you have a short-term health insurance plan, your plan doesn’t meet government standards. If you’re not sure if your plan is a short-term policy, go back and look at your plan information. A short-term health plan will refer to itself as a short-term medical, or temporary medical Insurance plan. Short-term health plans can be excellent to cover temporary coverage needs, but they don’t provide the benefits levels required by the Affordable Care Act (ACA), and therefore they may leave you open to tax penalties when you file your taxes.
QUESTION: “What kind of tax penalty will I need to pay if I stick with my short-term plan?”
ANSWER: If you don’t have health insurance that meets the Obamacare coverage requirements for more than three months in a row, you may face a tax penalty of $695 per adult or 2.5% of your taxable income, whichever is greater in 2016. The maximum penalty you can pay is equal to the national average premium for a bronze level health insurance plan.
QUESTION: “I thought I had to experience some kind of qualifying life event before I could enroll in a standard health insurance plan. Am I wrong?”
ANSWER: Most of the year you’ll need to experience a qualifying life event (such as marriage, the birth of a child, moving to a new city, or loss of minimum essential coverage.) before you can enroll in a major medical health insurance plan. During the Affordable Care Act’s nationwide open enrollment period, you can enroll in any major medical health insurance plan you want, without fear of being turned away.
QUESTION: “Can’t I just keep buying short-term coverage indefinitely? Why should I switch to a traditional individual or family plan?”
ANSWER: Most short-term plans limit your coverage to a maximum of six months at a time or less. And most short-term health insurance companies will limit how many times you can repurchase coverage in a row. It’s possible to be declined based on your medical history, so if you get sick and then need to re-apply for coverage under a new short-term plan, you may be out of luck. You’ll also miss out on the richer benefits provided by major medical health insurance plans that meet the standards of the Affordable Care Act. Don’t treat short-term coverage like a long-term solution. It’s not.
QUESTION: “What if I can’t afford a major medical health insurance plan?”
ANSWER: Depending on your income, you may qualify for government subsidies to help make your monthly premiums more affordable. If you’re age thirty or younger you may also be able to choose a “catastrophic” plan which will also meet the coverage requirements under the law. These often have less expensive than typical “bronze,” “silver,” “gold,” or “platinum” plans.
QUESTION: “I don’t know where to start when it comes to shopping for health insurance. Where can I find help?”
ANSWER: Work with a licensed online health insurance agent like eHealth. A licensed agent can help you understand your coverage options, provide you with quotes from competing insurers, and help you find the plan best suited to your personal needs and budget.