If you’re one of the millions of Americans who quit their job during the last few years, you’re probably wondering what you should do about health insurance while between jobs.
You could go on COBRA, which would mean paying out of your own pocket to continue with your former company’s group insurance plan. You could also sign up for a health insurance plan made available through the Affordable Care Act (ACA).
While both are good options, they can also be expensive.
But there’s a third option out there, says Ryan Newport, a licensed insurance agent with HealthMarkets in Oklahoma City: short-term health insurance.1
Here’s a look at what short-term insurance is and whom it might be right for.
Did you quit your job with no plan in place? Call a licensed insurance agent at (800) 304-3414 to learn more about short-term and other health insurance options.
What You Need to Know About Short-Term Health Insurance
Short-term health insurance is a form of coverage that provides medical services for a limited period of time. It can cover you for as little as six months (minus one day), or some policies have terms for up to three years (minus one day), says Newport. However, it’s important to remember that how long you can have short term coverage can vary from state to state.
While short-term health insurance won’t offer the kind of robust coverage you’d get from an ACA plan, most plans will cover the basics, such as emergency hospital services and some visits to the doctor’s office. It’s considered a form of insurance designed to provide healthcare coverage if you’re between jobs.
There are things, though, that short-term health insurance won’t cover. Your plan may not include prescription medications or mental health services, for example. “That’s why it’s a good idea to read over the plan carefully and discuss with your insurance agent whether it will be a good fit for you,” explains Newport.
Short-Term Insurance: The Pros
The big appeal of short-term plans is the cost as they generally have low monthly premiums. But there are other advantages to consider:
- You can apply anytime. Short-term health insurance is available year-round, and coverage often begins within days of applying, says Newport. You can’t enroll for ACA plans anytime—though if you lose employer-sponsored insurance coverage, it would be considered a qualifying life event, and you’d be eligible for a special enrollment period (SEP).
- You could save money. On the ACA exchange, you are eligible to get a premium tax credit, depending on your income. So, if your household income is between 100% and 400% of the federal poverty line in all states—except for Alaska and Hawaii—you may qualify for a premium tax credit. (The federal poverty line for individuals is $13,590 and $27,750 for a family of four.) Premium tax credits are based on your income and the number of people in your household. If you do not qualify, premiums for a short term plan will most likely be lower than the premiums for an ACA plan with no premium tax credit. If you are healthy and rarely need to see the doctor, a short term plan might work. But remember – short term is not a replacement for full ACA coverage, just a possible short-term solution for when you are between jobs.
- You can get it for a short time. Newport recently sold a plan to a female executive who had retired nine months before she was eligible to enroll in Medicare. “She could still see her physicians and get her prescription medications, and she knew she was covered if an emergency happened,” says Newport.
- Short-term insurance is easy to apply for. While the plans do require medical underwriting—which could exclude you if you have a preexisting condition—it’s usually answering a series of questions about your health history, says Newport. Approval can happen with days if you qualify.
Short-Term Insurance: The Cons
These plans aren’t for everyone. Among the reasons you might decide to skip this option and buy a fully ACA compliant plan instead after quitting your job:
- You have a preexisting condition. Since short-term plans require medical underwriting, they can reject you, says Newport. They can also put a cap on the coverage amount, usually around $2 million. While that may sound like a lot, “if you’re diagnosed with cancer and require extensive treatment, those bills can add up quickly,” says Newport.
- Short-term plans don’t offer maternity coverage. If you get pregnant while you’re on the plan, you’ll most likely have to switch to an ACA-compliant plan, says Newport.
- Short-term plans aren’t offered in all states. For example, you can’t get these plans in California or Connecticut.
- Short-term plans are temporary. It’s good to remember that short-term insurance plans are just that—short-term. Federal rules state that a short-term plan’s initial term must be less than 12 months, and the plan cannot be extended to include more than 36 months. (That’s why the longest plans all add up to three years minus one day, says Newport.)
If you’re still not sure if a short-term plan is right for you, especially while between jobs, it might be a good idea to call a licensed insurance agent at (800) 304-3414 or visit healthmarkets.com to browse your options.