Insurance

Return to Article

Mind the Insurance Gap

Terry Savage

College graduation means the end of studying, exams, term papers and grade-point averages.

Now grads can start worrying about the real stuff. Things like a job, a place to live, paying off student loans -- and making sure they have health insurance.

Health insurance may be the last thing on everyone's minds on graduation day. But for young adults who were under their parents' insurance, it's almost a certainty that graduation day means they no longer qualify for coverage.

If you're a grad, or the parent of a soon-to-be grad, it's important to make sure you or your loved one is covered between the time of graduation and the time of starting a new job. Even if that job is in the near future, a lot could happen between now and then -- and a broken leg or injuries from a car accident could be very costly during this gap in coverage.

The solution is short-term health insurance -- policies designed exactly for people in that situation. They're perfect for graduating students, or for those who lose a job and can't afford COBRA coverage provided by their employer while they seek new employment. Short-term policies also make sense for workers who retire a few months before Medicare coverage takes over, or for those hired for a new job but who must wait a few months before qualifying for a company health care plan.

Short-Term Security

You can purchase a policy for one month or up to six months. Then, if you still don't have a permanent policy, you can reapply for your policy for another six months at the end of the first term. After that, you must find permanent coverage. But the upshot is that if you do get that new job, you can cancel at any time with no penalty.

These short-term policies cover hospitalization and surgeries, as well as doctor's visits and other professional services. But the real benefit is knowing that in the case of extraordinary medical problems there is extensive coverage available.

Policies are sold with deductibles ranging from $250 to $2,500. The amount of the deductible you're willing to assume, plus the amount of the copayment you agree to, will determine the monthly premium.

The application process for a short-term policy is simple, with simplified medical underwriting. (Note: A pre-existing condition will disqualify you, and if you don't answer the questions honestly, you'll risk not being covered if you submit a claim.) You can pay your first bill by credit card or bank transfer, so the coverage goes into effect immediately.

Costs and Comparisons

Though short-term health policies have been around for a while, the field has become more competitive in recent months, so prices have fallen and benefits are more attractive.

The two leaders in the field are Golden Rule, a division of UnitedHealth(UNH Quote), and Assurant's (AIZ Quote) Assurant Health unit.

Price comparisons are easily made at eHealthInsurance.com, where there's a special section for short-term health insurance policies. You can also go directly to the Web sites of Golden Rule and Assurant Health. In general, the premiums for these plans are quite reasonable.

For example, a 22-year-old male could purchase a policy from Golden Rule with a $2,500 deductible and an 80/20 co-pay for $47.25 a month.

Lowering the deductible to $1,500 raises the premium to $56.70 per month. Golden Rule says the average price across all of its markets with a $500 deductible is $57 per month.

The monthly premium is important, but equally important is the breadth of the provider's network of health care professionals and hospitals. You'll want to use an in-network provider with these policies to take maximum advantage of the discounts provided. Golden Rule claims to have an edge with lower premiums in 75% of the ZIP codes in the country. It also claims that its discounts on cost of service are greater because parent UnitedHealth owns a huge network of providers with tremendous volume.

There's one caveat to keep in mind with short-term health insurance policies. They work fine -- but only up to one year. If during that period you encounter an illness, disease, or accident that will have long-term consequences, you'll be deemed to have a pre-existing condition when you ultimately seek permanent health insurance. Then costs related to that condition may not be covered, or not covered for at least one year.

But if you have a short-term need for health insurance and figure you're likely to have permanent coverage from a job in a few months, then these policies are the perfect solution to a potential gaping hole in your financial security. And that's The Savage Truth.