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What to look for in short-term health insurance

The Savage Truth

Short-term health insurance policies have become more attractive, thanks to a federal rule change that now allows policies to be sold for almost a full year and possibly be extended for 36 months.

These short-term insurance policies are a great solution for anyone between jobs or who doesn’t have insurance coverage at work, or who wants to bridge a coverage gap until Medicare, or who cannot afford the ACA (aka, Obamacare) policies available because they do not qualify for a subsidy.

Here’s how short-term insurance plans work: They require limited medical underwriting and are not required to cover pre-existing medical conditions (as ACA plans must do). They do not cover maternity expenses, and most do not cover prescription drugs. They typically have a lifetime payout maximum.

These limitations are significant, but the policies do provide insurance coverage, beyond a deductible, for potentially expensive illnesses or accidents that arise during the coverage period. And most of these short-term plans allow access to your choice of physicians or hospitals.

The real attraction is the low cost. Short-term plans are typically less expensive than ACA plans, especially if you do not qualify for a subsidy. According to eHealthInsurance.com, the average cost of a short-term care plan sold on their site last year was $110 per month, compared to $440 per month for an ACA plan.

For comparison purposes, eHealth provided some examples for people in Chicago. (Monthly premiums for ACA and short-term plans are set by geographic location, and the examples below do not reflect subsidies.)

Female, age 45:

Lowest-cost Obamacare

(bronze) plan: $378.65

Lowest-cost short-term plan: $68.61

Male, age 26:

Lowest-cost Obamacare

(bronze) plans: $268.52

Lowest-cost short-term plan: $40.62

Last year, short-term plans were suddenly limited to three months, after which you would have to reapply for new coverage. If you incurred a medical condition during your short coverage period, you might not even qualify for a renewal. And you faced a new deductible for each three-month period.

Now that the 90-day limitation has been rescinded, the initial short-term coverage period has been returned to 364 days (each state can set limitations), and the policy can be renewed up to 36 months. Each insurer may have different wording, so be sure to check the renewal limitations and qualification limits when considering such a plan.

Now that there is no longer a fine or penalty for not using the ACA plans, more unsubsidized health insurance buyers are likely to shop around for coverage.

The first step is to see if you would qualify for a subsidy under the ACA, which can reduce the cost substantially. The ACA plans likely afford broader coverage than most short-term plans, as well as coverage for those with pre-existing conditions.

Monthly premiums for ACA plans are brutal for those who do not get a subsidy. Those premiums have risen dramatically in the past two years, although increases are expected to moderate for 2019. So it’s worth checking out the coverages and qualifications of short-term healthcare plans instead of going without any coverage.

Several websites offer comparison tools so you can search ACA products and short-term policies, including on www.HealthPocket.com and www.AgileHealthInsurance.com.

The market for short-term health policies is about to expand dramatically, especially if ACA premiums rise again. Although many insurers will likely create new short-term plans to satisfy the demand, this is the time to start your comparison shopping and prepare for the year ahead. And that’s The Savage Truth.

Terry Savage is a registered investment adviser and the author of four best-selling books, including “The Savage Truth on Money.” She responds to questions on her blog at TerrySavage.com.

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