Considering Short-Term Health Insurance
- You need insurance – Just because you’re unemployed or between jobs doesn’t mean you should roll the dice.
- It’s like 911 – For emergencies only, in other words. Short-term health insurance doesn’t cover pre-existing conditions or preventative care, but it will cover when, all of a sudden, you have an accident and a $500,000 hospital bill.
- “Credible coverage” – If you have a lapse in health care coverage of over 63 days, you’ll have a trickier time getting long-term health care when it becomes feasible. Make sure the short-term plan you choose is recognized as “credible coverage.”
- Beware of non-participating states – Short-term health care is not available in NY, NJ, CT, MA, VT, and HI. However, you can carry short-term policies from other states into these ones.
- What about COBRA? – If you've been laid off or left your job, you're entitled to continue receiving the same health benefits you did as an employee for 18-36 months, but at your own expense. It's more expensive, but useful if you get a lot of prescription drugs, visit the doctor often for a pre-existing condition, etc.
Here's a common recent grad dilemma: you know that health insurance is theoretically important, but you don't have a job yet or you're about to take a little time off before switching to a new one. Yes, you could try throwing away all sharp objects and locking yourself away in a room, but
we know how well that worked out in Final Destination. Taking "a few months off from health insurance" while continuing to live in a world where accidents and sudden illness can happen to anyone is like saying you'll take a break from the pill but continue to have unprotected sex—it's not smart, and the ramifications can be unwelcome and prohibitively expensive. Thankfully, short-term health insurance can help you cover your hide until a more sustainable solution becomes available.
Before diving in to this option, make sure you review our guide to Understanding Health Insurance and brush up on the concept of deductibles (i.e., the predetermined amount that you have to spend on medical services in a given year before the insurance company kicks in and starts paying). Within the context of health insurance as a whole, you can basically think of the short-term option as a low-cost, high-deductible plan that covers you up to a year. It's perfect for the recent grad who can't yet afford a long-term plan, but who recognizes that insurance is all about risk mitigation and wants to protect themselves in the event of a medical catastrophe. However, as with all matters relating to insurance, there are some subtleties worth noting. Read on if you think short-term health insurance might be the right choice for you.
What Is Short-Term Health Insurance?
Ok, let's back up really quickly. Short-term health insurance is just what it says it is—a type of health care coverage that’s available for short time frames, most commonly 30 days to a year (often you can renew your policy up to a year, but then you’ll have to find a new provider). In addition to the time frame, there are two other keys aspects of short-term health insurance that you don’t get from the name: 1) it’s more affordable than standard coverage, and 2) it’s less comprehensive. In other words, it’s a “tide-yourself-over” option rather than a long-term one. As such, it can work out very well for young, healthy recent grads who are job-hunting, between jobs, or currently working in a job that doesn’t provide insurance benefits. (Even if you did land a job that provides health insurance, it can often take a while for your benefits to kick in. Speak with your employer and consider short-term health insurance if you need interim coverage.)
As a general rule, short-term health insurance works best for people whose main goal is to avoid the crippling costs associated with a major medical emergency. Deductibles tend to be high ($1,000 and up—lower ones will result in higher monthly costs), and pre-existing conditions and preventative care are not covered (learn more about “pre-existing conditions” here). Basically, you get covered for injury and illness, and in the case of a major hospital visit you’ll be compensated up to a pretty high ceiling mark ($100,000 to over $1,000,000+, the latter being preferable). If you visit the doctor often or need to buy prescription drugs, short-term health insurance isn’t great because of the high deductibles and the fact that it doesn’t cover prescription drugs (or ob-gyn visits, for that matter). That said, the cost of any medical treatment can be astronomical when you aren't insured, so short-term is always better than no insurance at all.
Another benefit is that a short-term health care plan can, in some cases, help you maintain “credible insurance coverage” under the Health Insurance Portability and Accountability Act (HIPAA). At a basic level, this means that you cannot be denied future insurance claims or excluded for pre-existing conditions (once you have more than a 63-day break in “credible coverage” you’re back to square one). Make sure you check with the provider before assuming that the short-term policy will maintain your "credible coverage."
Note:: Often, you will be asked to pay doctors and hospitals directly and then file your claims to the insurance provider. On the plus side, you can see whomever you want as these plans are not HMOs or PPOs.
How Much Does It Cost?
The website eHealthInsurance.com notes that “short term health insurance ranges from about $25 to $125 per month. Deductibles are high and co-insurance rates run from 20-50%.” For the typical recent grad, a more realistic range is $30 to $70 per month (assuming you don’t smoke). However, you can often work out a discount (up to 30%) if you pay upfront in a single payment. Start budgeting to make some room in your monthly expenses to cover it—skipping out on that daily Starbucks 10 days a month could insure you against getting hit by a bus!
Finding a Plan
The good news is that when you’re choosing short-term health insurance, there are a lot fewer options and acronyms to deal with than when you’re getting full coverage. The different criteria you’re comparing boil down to price, deductible, co-payments, and benefit limits. If you’re main goal is to insure against a major medical catastrophe, then you probably want to find some balance between a low monthly premium and a high maximum payout. Often, once you meet your deductible, the provider will pay 50-80% up a certain level, (e.g., $5000), and then 100% up to the ceiling (e.g., a million bucks).
In terms of finding a provider, MSN Money suggests that you “try your nearest Blue Cross, or talk to an experienced health insurance broker.” You can get short-term medical quotes specifically for grads from GradGuard, or compare quotes at eHealthInsurance.com to get a sense of your options. Finally, you should see what providers have affinity programs with colleges. Check out sites like USI Affinity, Meyer and Associates, or GradMed, or get in touch with your alumni office directly to see if it can point you toward an affiliated plan.
What If I’ve Recently Left a Job or Been Laid Off?
If you had a job with benefits and have either been laid off or are switching jobs, you’ve got another option for short-term coverage: COBRA. It sounds ominous, but it's actually pretty useful: The Consolidated Omnibus Budget Reconciliation Act allows you to extend the coverage you received from your employer’s group insurance for 18 to 36 months, though you will now have to pay the premiums yourself (either to the employer or directly to the insurance company).
Of course, this course of action will be more expensive than short-term health insurance, but you will have better benefits and avoid a lapse in “credible coverage,” which is particularly important for pre-existing medical conditions. (Read this article for an explanation of how short-term health insurance could create an unwanted lapse in coverage.)
Do All States Offer Short-Term Health Insurance?
No. There are seven states that do not get jiggy with short-term health insurance: New York, Connecticut, Hawaii, Massachusetts, New Jersey, and Vermont. In these states, there will be other options for the temporarily uninsured. (In New York, for example, Healthy New York provides affordable coverage for uninsured individuals, though there are strict eligibility requirements and you must have worked within the past 12 months.) However, you can carry out-of-state short-term health insurance, so if you are moving or have a temporary/permanent address in a different state (e.g., your parents) you can still consider a short-term plan. If all else fails, call up the major providers (e.g., Blue Cross) and see what kind of solutions they can offer.
For more options, check out our guide to Getting Healthcare Without a Job.