Short Term Vs. Long Term Health Insurance Plans

by Admin on February 25, 2013

Short-term health insurance is a temporary solution for individuals who may need a several month interval of coverage before a long term plan begins. Temporary coverage is only available for up to 6, sometimes 11 months, and such plans cannot be renewed. They are designed for people who are switching from one job to another and waiting for their new employer-sponsored insurance to begin, or those who have applied for an individual plan and want immediate coverage until they receive approval.

Additionally, buying a short-term plan means you are limited in your healthcare options compared to an annual plan. Generally, short-term plans include emergency and hospital care, lab work and X-rays, office visits, and prescriptions. Most will not cover preventive care, as they are simply providing a few basics to last a few months. As they are a momentary patch in your coverage year, you can cancel a short-term plan anytime you like, preferably once your new benefits start.

When to use temporary coverage:

  • Waiting period for group insurance at a new job
  • Out of work and lost benefits
  • Past age for dependent coverage under parent’s plan
  • Graduated college and student coverage ended
  • Waiting for approval from a private or public health plan

Why Short-Term Plans Are Not A Long-Term Solution

First of all, these plans end after a set number of months. If you haven’t secured a 12-month plan by the time your short-term coverage expires, you cannot renew your plan and will have to go through a period without any coverage until you enroll long-term. Each health insurance company offering short-term plans varies the duration of their coverage limit, but they usually do not exceed one year.

The next major issue with these plans is the lack of coverage. As they are intended to hold a person over for a certain amount of time, they are just about level with a catastrophic plan (a high-deductible plan with hardly any benefits besides hospital and preventive care) in terms of how many services you have access to.

Will you really meet a $5,000 deductible (the annual dollar amount you must reach before your plan pays for most services) in a matter of a few months, and therefore, how much will you really be saving by not enrolling in a year-long plan? If health insurance is about safety, then you should apply for the least risky, most predictable plan possible.

Long-term health insurance is much more secure, placing you at a lower risk financially and medically, though it depends on the plan you choose. Certain long-term plans, such as those with a high-deductible, can be less than ideal if you want the most benefits and the greatest savings.

While you still must meet a calendar-year deductible with a comprehensive plan (usually a plan that pays 80% of your major medical costs once you’ve met the deductible, and offers copays for several services), you at least have a greater variety of benefits and the ability to renew your plan for another year. Selecting a plan with copayments brings your medical costs down immensely and makes life much easier than dreading your short-term plan’s non-renewable expiration date.

To find out more about getting the right health insurance coverage for yourself or your family, as well as a glossary of terms and other basics, click here.

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