5 Reasons Short-Term Medical is Right for You (and 5 Reasons It’s Not)
I may earn a commission from the companies mentioned in this post. Regardless, I only recommend products or services I use personally and believe will add value to my readers.
Golden Rule, National General, Pivot Health, IHC Group. What do all of these have in common? They are all Short-Term Medical (STM) insurance. Also known as “term health insurance” or “temporary health insurance,” STM plans were traditionally used to cover the 90 days before a new employer’s benefits kicked in. Oftentimes, they are still used for that, but, more recently, they have been expanded in some states to cover up to 12 or even 36 months. Many people are starting to use STM plans in lieu of the Affordable Care Act (ACA) Marketplace due to lower premiums or prejudices about “Obamacare.” Understanding the health insurance you are signing up for is vital. It’s why health insurance advisors (like me) have a job! STM plans need more legwork than Marketplace plans because there are more restrictions and exclusions on STM plans; which is one of main reasons the ACA was necessary.
When my family and I were moving from Hawaii to Florida, I found myself in this situation. I didn’t have a job and didn’t know when I would be able to get my family of 4 onto another employer plan, but it would have been ridiculous for us to keep our previous plan because, a) the COBRA plan was almost $1800 per month (and we had almost no income) and, b) our Hawaii coverage would not cover us in Florida. Instead, I got a plan through a company I had never heard of, but who gave me a good rate for a three-month plan. My shoulder started hurting from moving boxes and carrying my kids around, so I went to see the doctor. They recommended that I get an MRI. I scheduled it, but was told that my insurance would not cover the MRI! It took nearly a week to get in touch with a live person and find out why I was not covered: I had dislocated that shoulder when I was in my early teens, nearly 12 years earlier. The insurance company returned my premiums, but would not cover a “pre-existing condition”.
That was when I started to learn more about STM plans. Anyone can apply for short-term insurance but, because they are not a part of the ACA, aka “not ACA compliant,” STM plans can refuse to cover preexisting conditions, well-child checkups, prescriptions, or (what I see most often) pregnancy. They use medical underwriting – the process of looking at your medical history – to limit your coverage or, sometimes, to refuse to insure you at all. In my case, they underwrote me at time of claim, meaning that they took my money in hopes that I would not have any medical claims and found a reason not to pay when I did.
That was my first experience with Short Term Medical plans, but it wasn’t my last. I have found that there are times when STM plans work perfectly and are perfect for some people. In other circumstances, they aren’t worth the time, effort, or price.
You Should Get a Short-Term Medical Plan because…
1. Your employers’ plan doesn’t start for 90 days
You left a job and you have to wait 90 days before signing up for a plan with your new employer. This is what STM plans are for. And what they do best. But you have COBRA as an option, you’re thinking, and you’re right, you do. COBRA can be a great option, but it can also be expensive; you are now paying all your premiums with no help from your previous employer. It might be better to just get an STM as a band-aid between one group plan and another.
2. Your Affordable Care Act plan starts Jan 1st
In the middle of the year, you realize that your coverage ended 61 or more days ago without informing you. (You have no idea how often this happens!) You missed a payment because you changed bank accounts or the insurance company canceled your plan without telling you. Now, you have to wait for the next OEM to sign up for a Marketplace or Group plan, which will start… Jan 1st. STM plans are made for this situation. Talk to a health coverage advisor to find out your options until your next plan starts.
3. Your Medicare is starting in 6 months (or less)
Congratulations! You’ve retired! But you are not 65, so you don’t qualify for Medicare yet. If you have less than 6 months before you qualify for Medicare, STM plans do a great job of covering you until you are ready for a ‘guaranteed issue’ plan – a plan that guarantees that you will qualify, like Medicare. Some STM plans will not take people that close to Medicare age, but most will do a great job covering you in the interim.
4. You’re 26 and want to put off getting a high-cost plan
At age 26, your parents can no longer keep you on their plan and you have to find your own. You have 60 days to sign up for health insurance through the Marketplace, but not everyone knows that they have to do it quickly. If you need more time to figure out what kind of plan you want, STM plans will bridge the gap until you can either get onto a plan with your employer or sign up for an ACA plan. . Again, getting an STM plan for the short term to cover a gap in coverage is one of the best uses of these plans.
5. You’re self-employed and don’t have an employer plan
This one gets into a bit of grey area. If you are healthy, you can get an STM plan for up to 36 months (in some states) and the prices can be less than the Marketplace depending on the deductible and coverage, etc. However, if something happens to you during those 36 months, you might not be able to get another STM plan. Or they might limit your coverage. There are private plans available (if you qualify) that will cover you until you’re 65; your age when you start the plan doesn’t matter.
You Should NOT Get a Short-Term Medical Plan because…
1. You need to see a doctor tomorrow
Most STM plans have, at the least, limitations on preexisting conditions. Some don’t cover them at all, some cover them after you are on the plan for a while, or if you haven’t had any related medical care for a while – normally 60 months or more. What you don’t realize is that, if you are still being checked for cancer after being in remission, even years later, that counts as related medical care and they can refuse to cover your cancer bills if it comes back. If you have a stint put in, that stint is considered ‘ongoing treatment’ and any heart related issues may not be covered. And if you are already sure there is something wrong, don’t get a STM plan and go see the doctor the next day. I guarantee they will not cover a cancer diagnosis within 7 days of you buying their plan.
2. You need a cheap plan
The monthly premium might be the lowest. But that is not all you need to look at in terms of expenses. What’s my copay/coinsurance? What’s the deductible? What’s the network? If I’m out-of-network, does that change what’s covered? What’s the plan’s term? If you have a 3-month plan with a $10,000 deductible, your annual deductible is $40,000! If your plan has an annual limit or a lifetime limit that is low, you could be on the hook for a lot more than you bargained for.
3. You need to get an annual checkup
A majority of STM plans don’t cover annual checkups or have a limit on how much they cover. That means that they may cover one well-child check, but in the first year, most children have six or more wellness checkups. That means you are responsible for 5 doctors’ visits and any lab tests that need to be done. Some plans that do cover preventative care, even in a limited amount, may have a waiting period of 6 months or more before that part of the plan starts.
4. You need prescription coverage
There are 3 prescription coverages: plans that give a discount on prescriptions, plans that cover prescriptions (possibly limited to a set dollar amount), and plans that don’t cover prescriptions. If you need a prescription, especially a brand-name prescription, STM plans aren’t going to help too much. Oftentimes, your doctor will have better options than your insurance company in getting prescriptions from the pharmaceutical company.
5. You need mental health coverage
43% of STM plans cover NO mental health. Hopefully, with lockdowns and quarantines during COVID-19 bringing mental health into the spotlight, that will change. If a priority for you is to be able to see a mental health physician, STM plans are not for you.
Getting any health insurance plan is important to your financial independence; they are meant to protect your assets in the event of a major medical issue, or even sometimes a minor one. I don’t recommend Short Term Medical plans for the long term (it’s in the name!) but they do a good job in what they are meant to do. STM plans have always been known to be a lower-cost option for health coverage, but confusion about how your STM plan works is one of the main reasons I always recommend speaking to a health coverage advisor or licensed agent before purchasing an STM. Be open with them about your expectations of the plan – it’s their job to help get you what you need.
The most important lesson I learned is that you need to talk to someone. Just don’t put your info into a website that talks about getting plans at a cheap rate. These are most often landing platforms where your info gets sold, even if you are on the Do Not Call list, and you will be called. For personal assistance, or to learn more about your STM options, you can contact me at mharney@myhst.com or join my email community and get more info about health insurance, personal finance, and more.
This information is for educational purposes only. It is not medical advice. Always consult your doctor for appropriate examinations, treatment, testing, and care recommendations. Any third-party content is the responsibility of such third party. I do not endorse or guarantee the accuracy of any third-party content and is not responsible for such content. Your access to and use of this content is at your sole risk.
