Missing the deadline to purchase health insurance does not mean consumers have to forego coverage for nearly a year until the next open enrollment season starts.
Short-term health insurance plans are one method to manage not having health coverage. After all, one trip to the ER can be an expensive one that can set you back for months or longer since unpaid medical bills is one of the top reasons consumers file for bankruptcy.
Although neither short-term, accident or critical illness insurance will meet the requirement for health insurance coverage under the Affordable Care Act and consumers are still subject to the tax penalty for being uninsured for two consecutive months or longer, these plans will put a cap on your financial liabilities, said Nate Purpura, vice president of consumer affairs at eHealth.com, an online health insurance exchange based in Mountain View, Calif. There are many qualifying life events that could make you eligible for buying health insurance under the special enrollment period such as moving to another state, getting married or divorced or turning 26 and aging out of your parent’s plan.
The short-term plans usually do not include coverage for preventive care like an annual physical or pre-existing medical conditions or prescription drugs. They can be a good option so that your expenses do not wind up unsurmountable in case you are injured or wind up sick.
The short-term plans are often “significantly more affordable” than standard health insurance plans, he said. The monthly premiums can range from $50 to $150.
The coverage typically does not last longer than 6 to 12 months, but you can usually apply again at the end of that period. While this option can serve as a backup plan, also ask your doctor for their “cash” value of a visit, which is often affordable if you need a checkup or have a minor illness.
Six states currently do not allow the sale of short-term insurance – Minnesota, New York, Vermont, Massachusetts, Rhode Island, New Jersey and Maryland, said Noah Lang, CEO of Stride Health, the San Francisco health insurance exchange company. Other states such as California limit the length of the policy and consumers can only be covered for up to six months.
Accident insurance is designed to help consumers if they have a qualifying injury. The money is paid directly to consumers rather than to the doctor, which means you can do what you want with the payout such as paying medical bills or for your rent, said Purpura.
Critical illness insurance plans work similar to accident plans because consumers receive a payment if you are diagnosed with a qualifying illness such as cancer or heart disease.
It seems like a no-brainer to simply purchase a temporary plan and use it year-round if you are young and healthy, since you can save money each month, but there are a few catches:you are still liable for the tax penalty, they do not cover any pre-existing conditions and have payout limits of usually $1 million to $2 million, said Jack Hooper, CEO of Take Command Health, an online health insurance exchange based in Dallas.
“In the eyes of Obamacare, temporary insurance counts as being uninsured, meaning you’re liable for penalties and taxes,” he said.
The tax penalty for not having health insurance coverage rose for 2016 and now consumers are liable for $695 or 2.5% of their income, whichever is greater.
When You Qualify for Special Enrollment
The deadline for consumers to purchase insurance under the Affordable Care Act is January 31, but many circumstances and life events qualify under special enrollment, so consumers can purchase health care coverage after the fact.
When a qualifying life event occurs, consumers trigger a 60-day special enrollment period to purchase a new health insurance plan.
The federal government this year is “cracking down and making it harder” to qualify for special enrollment periods, said Purpura.
In 2015, it was “easy to abuse or manufacture special enrollment periods and Healthcare.gov largely relied on applicants being honest,” said Hooper. Insurance companies are attempting to avoid consumers who only buying a plan when they get sick, which could in turn make it more expensive for people who buy coverage year-round.
“If there were no limitations on when you could sign up for insurance, no one would purchase insurance until they were sick,” he said. “This would force the insurance companies to have to charge more to pay their member’s bills, who could just cancel as soon as they were well and then sign up again if and when it was needed.”
Losing coverage from being laid off from a job is one of the legitimate reasons a person may need to purchase or change insurance during the year. Many of the reasons will require paperwork to prove the change. Some insurers require a letter from your former boss which confirms the loss of coverage with the date and the reason it occurred while other insurers will accept a letter showing eligibility for COBRA. Obtain documentation for other life changes such as a court-stamped copy of the divorce decree, copies of utility bills from both your former and the new residence, when you move to a new coverage area or adoption papers.
Some other life events do not qualify other such as if you did not have health insurance at your old address and move to a new coverage area, said Purpura. If you lost coverage because you did not make your payments, that is not an eligible reason.
“Cancelling coverage under your old plan or COBRA coverage because it is too costly are not qualifying life events,” he said. “The loss of coverage under a short-term health insurance plan is not a qualifying life event.”