A frequently asked question from our customers about health insurance prices is “Why is it that when I search for pricing, I’m getting cheaper costs with short-term plans? What is the difference between those and the major medical?”
The answer is that short-term plans are able to strip away a lot of the protections of the Affordable Care Act. As a reminder, the ten essential benefits that were put in place by this law, sometimes referred to as “Obama Care” are:
- Ambulatory Services
- Emergency Services
- Pregnancy, maternity and newborn care
- Mental health and substance abuse
- Prescription Drugs
- Rehabilitative and habilitative devices
- Labratory Services
- Preventative Services
- Pediatric Services
Also, there are two HUGE requirements to ACA plans: no medical underwriting and no denying claims based on pre-existing conditions and no life time limits.
Short Term plans tend to cut away the benefits that bring high dollar costs to the carrier. Typically, there is medical underwriting to qualify, pre-existing conditions will NOT be covered, and the lifetime limit can go anywhere from 100,000 to 2,000,000. They also typically will not cover pregnancy or mental health and usually, the customer can also forgo the preventative care and prescription drug benefits if they want.
Pros of Short-Term Health Plans:
1. They will be significant savings IF you do not qualify for financial help on the marketplace plans.
2. If you are relatively healthy, only see the doctor a couple of times a year, and do not need the more extensive coverages, it can be an affordable way to cover your family.
Cons of Short-Term Health Plans:
1. Every policy will have the disclaimer “does not meet minimal essential benefits” and at one point there was a financial penalty for not carrying that on your tax return. At the moment that is not in play, but it could make a return in future health insurance reforms. If this happens, it is very likely a new enrollment on the compliant plans would be opened up, but that’s not guaranteed.
2. The marketplace is only open at certain times of the year or in special conditions. If you were to acquire a very serious illness, it may be a long time before you will be able to pick up a plan with more extensive coverage.