If you missed Part 1 of our series on Short-Term Health Insurance, you can catch up here: The Basics of Short-Term Health Insurance.

Some consumers are using short-term health insurance as an alternative to Obamacare Affordable Care Act (“ACA”) coverage. Short-term health insurance plans are significantly less expensive than non-subsidized plans under Obamacare—sometimes less than half of the cost.
However, they are not “qualifying plans,” which means that consumers still face penalties for failing to have coverage at tax time and cannot get a subsidy towards the premium cost. For some people, the cost of short-term coverage and the penalty is still far less expensive than paying for authorized medical insurance under Obamacare.

Coverage Differences

Short-Term: Coverage for Emergencies

Short-term health insurance acts as emergency medical coverage. You are normally not limited to specific doctors so you can go virtually anywhere in an emergency situation. Short-term health insurance often will not cover things like regular doctors’ appointments or treatment for preventive care.

Short-term health insurance is also, by its nature, short. Most policies only last for one year or less. In some cases, you can renew the policy as long as your health status has not changed, but the insurance company can reject your application if you developed any health conditions in the past year. Customers often move to a different short-term health insurance carrier if theirs will not or cannot renew their policy.

Obamacare Plans: Comprehensive Coverage

Obamacare plans are designed to provide coverage for the major areas of healthcare. This means that each Obamacare plan will provide you with comprehensive healthcare coverage and ensure that you have access to healthcare when you need it, even if you have pre-existing conditions.
In order for a plan to “qualify” under Obamacare or the ACA, it has to offer certain services, including costs for prescription drugs and preventive services. There is a price to pay for these services, however. The average premium for an individual plan is $82 per month, after considering cost assistance offered for some low and middle-income individuals. Coverage ends up costing between 2 percent and 9.5 percent of your total income for most Americans.

Obamacare Vs Short Term Health Insurance

When considering whether to opt for a qualifying plan under Obamacare or a short-term health insurance plan, it is a good idea to weigh pros and cons. You can use the following chart to help you decide.

Keep in mind that the chart below provides information for most plans, but it may not reflect your particular plan. It is important to read the coverage section carefully for any plan that you are considering.

Obamacare or ACA Coverage

Short Term Health Insurance

Enrollment

When can you apply for coverage?

During open enrollment or after a qualifying life event

Anytime

How quickly does coverage start?

Usually within 45 days

Usually within 2 weeks (and often within 48 hours)

Can plans be bought on a state exchange?

Yes

No

Can plans be bought off the state exchange?

Yes

Yes

Guaranteed Acceptance?

Yes

No

Health Care Coverage

Ambulatory patient services

Covered

Covered

Emergency services

Covered

Covered

Hospitalization

Covered

May or may not be covered (generally covered in an emergency, but not based on preexisting condition)

Pregnancy, maternity, and newborn care

Covered

Not covered

Mental health and substance use disorder services

Covered

Not covered

Prescription drugs

Covered

Not covered

Rehabilitative services

Covered

Not covered

Laboratory services

Covered

Not covered

Preventive and wellness services

Covered

Not covered

Chronic disease management

Covered

Not covered (may be grounds for denial of coverage)

Pediatric services

Covered

Not covered

Birth control coverage

Covered

Not covered

Breastfeeding coverage

Covered

Not covered

General doctor visits

Covered

Sometimes

Preexisting conditions

Covered

Not covered (may be grounds for denial of coverage)

Costs
Subsidies Available to help with premium cost

Yes

No

Dollar limits on coverage

No

Yes

Protects from health insurance tax penalty

Yes

No (2.5 percent of your annual income or $695 per person, whichever is higher for 2016)

Other Key Differences
Network

May need to be in network for coverage to apply

Generally unlimited (no specific doctors or locations required)

Time constraints

None

Coverage for up to one year

Is the plan renewable?

Yes

Sometimes, but renewal can be denied

Filing claims

Handled by care providers

Policy holder is responsible for filing claims

Why Use Short Term Health Insurance?

In the Marketplace, everyone’s insurance coverage cost is relatively the same because insurance companies can no longer adjust fees as they once could due to preexisting conditions and other health concerns. That means that healthy individuals who do not require much medical care are paying the same premium as those people who see the doctor regularly.

It’s easy to see the benefit of ACA plans for people who see the doctor regularly as their coverage is cheaper than it once was. Generally, healthy individuals simply do not have the same advantage.
Short-term coverage is a way for healthy individuals to pay less for insurance, at least as long as they can renew their short-term coverage plans. It does not offer the same types of benefits, but the key question to ask yourself is how much the more comprehensive coverage of an ACA plan is worth to you?

It’s also important to remember that those who use short-term health insurance will still have to pay a tax penalty for not having approved coverage. Nonetheless, for some people, particularly those who are in the middle-income category, the cost of the penalty may be less than what they would have paid for a qualifying health insurance plan.

Deciding to Use Short-Term Health Insurance

Many people use short-term health insurance as “gap” coverage. That is, they use it as a short-term solution to get them through to open enrollment or a new job. This is undeniably a smart choice when ACA coverage isn’t available. For others, using short-term insurance coverage as long as possible can make sense. Take a hard look at your financial situation and make a realistic evaluation of your health before deciding whether short-term health insurance or Obamacare are the best fit for you. Check back next week for Part 3 of our series on short-term health insurance: When should I get short-term health insurance?

The team at HealthMatchup.com is passionate about helping people find the best health insurance for their needs. We believe that finding the right health insurance plan shouldn’t be hard. In fact, we think it should be easy. We work with trusted partners to bring you all of the information you need to choose an insurance plan that fits both your health needs and your budget. Getting healthcare quotes is quick and easy, giving you free access to all of the best health plans available in your area.