The Advantages of Short-Term Health Insurance

Short-term health insurance has some advantages over standard health insurance that could make it just what you're looking for. Image © Kondoros va Katalin/Getty Images

Short-term health insurance policies in the United States have definite drawbacks such as excluding coverage for pre-existing conditions, exposing you to the tax penalty for being uninsured, and confusing episodic deductibles. However, they also have several advantages over more traditional major-medical policies.  Here’s a rundown of the advantages short-term health insurance policies have over major-medical policies.

You Can Buy a Policy Whenever You Want

There is no open enrollment period for short-term health insurance. Although major-medical policies in the United States limit new enrollment to open enrollment periods, you may buy a short-term policy at any time. In fact, people who missed their job-based or exchange-based open enrollment period commonly turn to a short-term health insurance policy to limit the risk they face by being totally uninsured. Short-term health insurance won’t solve all of the problems associated with missing the open enrollment period at work or on the exchange, but it will help.

Coverage Takes Effect Immediately

While most health insurance has a waiting period between when you enroll and when the policy goes into effect, short-term health insurance is the exception. In fact, a good use for short-term health insurance is to cover you during the gap between when you start a new job and the month or two later when your new company health plan coverage begins.

You may arrange a short-term policy to take effect at any date in the future, or even tomorrow, depending on how long it takes the short-term health insurer to complete the underwriting process and determine a premium. After the underwriting process is complete, when your coverage begins is up to you.

A Range of Benefit Maximums and Premiums Are Available

If you’re used to limited job-based health insurance options during your open enrollment period at work, you’ll be happy to hear that you can tailor a short-term health insurance policy to meet your specific needs. Want a low deductible and a high pay-out maximum? Your short-term health insurer can write a policy that will meet your needs. Would you rather have a higher deductible, fewer covered benefits, and a lower coverage maximum so you can keep your monthly premiums at a minimum? Your insurer can provide a short-term policy to meet those needs, too.

More Affordable Than Comprehensive Major-Medical Health Insurance

Short-term health insurance is subject to underwriting, a process in which an insurer calculates the risk of insuring you and bases your premium on that risk as well as on the type of benefits you request. Additionally, short-term policies are not guaranteed issue, meaning an insurer can refuse to insure you if you present too large a risk.

Because insurers can limit their risks with these techniques, short-term health insurance policies tend to be less expensive than more comprehensive major-medical plans which must be guaranteed issue, aren’t allowed to exclude pre-existing conditions, and must offer coverage of the 10 essential health benefits.  

If you’re not looking for health coverage for maternity or preventive care and you don’t have a lot of pre-existing conditions, short-term health insurance can be significantly less expensive than you’re used to paying for Affordable Care Act-compliant major-medical health insurance.

Disadvantages of Short-Term Health Insurance

Although short-term health insurance policies can be an inexpensive, flexible, and convenient alternative to comprehensive major-medical coverage, they also come with significant disadvantages. Before you buy short-term health insurance, become familiar with the drawbacks you’re likely to face so you’re fully informed. Learn more in “The Shortcomings of Short-Term Health Insurance.”

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