Consumers who missed open enrollment on the state health insurance marketplaces this spring or who are waiting for employer coverage to start don’t have to "go bare." Short-term policies that last from 30 days up to a year can help bridge the gap and offer some protection from unexpected medical expenses. But these plans provide far from comprehensive coverage, and buyers need to understand their limitations.
In contrast to regular health plans, applicants for short-term coverage may be rejected because they have pre-existing medical conditions.
Even if they’re accepted by the plan, the drugs and medical care necessary to manage their diabetes, for example, generally wouldn’t be covered, says Carrie McLean, director of customer care at online health insurance vendor ehealth.com.
Nor do short-term plans typically cover preventive care or pregnancy and maternity services.
"It's not going to function like a regular health plan," says McLean.
Lifetime coverage maximums are typical as are high deductibles. Between April and June, the average deductible for short-term individual plans sold by ehealth.com was $3,391, while families faced an average deductible of $8,252. Premiums averaged $107 for individuals and $249 for families.
Plans with similar limitations and restrictions used to be commonplace on the individual market. But the health law changed that. Today, regular insurance plans sold on the individual and small group markets must all cover a comprehensive set of 10 "essential health benefits" and they can no longer turn people away because they have pre-existing medical conditions.
The 2014 enrollment for these plans ended in March, but some people who have specific changes in their life, such as losing job-based coverage or having a baby, can still get a special enrollment period to sign up for regular insurance plans.
Because short-term plans don't meet the standards of the health law for "minimum essential coverage," they also expose consumers to the health law penalty for not having health insurance of $95 or 1 percent of income, whichever is greater.
So why would someone buy a short-term plan, anyway? Basically, it provides some protection against catastrophic hit-by-a-bus expenses. Some consumers are looking for just that.