Short Term Medical Insurance
Facts and Fallacies about short-term medical
Short Term Medical Insurance has become the most popular type of health insurance purchased online by
individuals. Its popularity is equal to that of international health insurance, whose growth is necessitated by
growing international travel. The growth is driven by low cost and easy online enrollment. This article highlights
many common misunderstandings about short term medical insurance.
The rapid growth of short term medical insurance in the United States has taken many by surprise and caused some
confusion among consumers, the health care industry and insurance regulators. The recent popularity of this
coverage is driven primarily by lower costs and easy online enrollment. In addition, insurers have taken steps to
make short term medical insurance look more like regular long term coverage by adding policy features and extending
maximum coverage periods. The number of short term medical policies issued online grew dramatically from less than
100,000 in 1997 to several million policies today.
Read this guide to dispel some common misunderstandings about short-term medical insurance,
including links to useful reference websites.
Short term medical insurance is the most popular type of health insurance issued to individual health plan
applicants today. Many of these applicants have never been counseled by a qualified insurance adviser so the
potential of problems related to misunderstandings is increased. This article is meant to highlight many of the
areas of misunderstanding but is not meant to replace the advise of a qualified personal adviser or a careful
reading of your insurance policy.
Background and History of Short Term Medical
Health insurance managers noticed through the 1980s and 1990s that most people who enrolled in individual health
insurance plans kept that insurance for less than a year. Many people paid considerably more in premium for the
legal right to renew their coverage year after year as long as the health plan remained in business. This is called
"non-cancelable" coverage. That coverage option added as much as 35% to the cost of health insurance and was not
necessary for more than 90% of the health plan's members. Since cost has been the primary driver of health plan
sales, insurance companies were eager to promote lower cost policies that expired after a certain length of time.
These plans are especially popular with recent college graduates, people between jobs and those starting a new
What is Covered by Short Term Medical
All short term medical insurance policies cover "ordinary and necessary medical expenses" as defined by the
policy. This is the most generous definition of coverage in use among health plans today and basically means
something that is prescribed by your doctor in accordance with American Medical Association standards. These
policies cover medical expenses only. Dental expenses and ordinary vision care are not considered medical expenses.
Most policies cover prescription drug expenses the same as any other medical expense. Most policies have a maximum
coverage limit of $1 million to $5 million for catastrophic claims.
Dental expenses are usually not considered medical expenses and as such are not covered by
health insurance plans.
What is Not Covered by Short Term Medical
Short term medical insurance does not cover pre-existing medical conditions, no matter how long ago you had
symptoms and treatment. If you had ear infections five years ago that were completely cured, a new ear infection
will not be covered under a new short term medical insurance policy. Maternity expenses are not covered. All short
term medical insurance policies have a per person deductible that is not paid. Some policies also have a
co-insurance that could add to the uncovered expenses.
Quality of Short Term Medical Insurance
Considering the fact that these are "indemnity" type plans offering liberal coverage with any doctor or hospital
anywhere in the country, short term medical insurance is considered to be among the highest quality health
insurance plans in use today. The obvious limitations of pre-existing conditions and overall length of coverage
under a policy are the blatantly obvious restrictions on quality of coverage.
Length of Short Term Medical Insurance
Most short term medical insurance policies are issued for six months at a time. The shortest policy is 15 days
but most insurance companies require a purchase of at least 30 days coverage. Some plans may be available for up to
three years. It is possible to enroll in one six month plan after another to achieve to total overall length of
coverage needed. A few states require members to switch health plans every 12 months in order to continue to use
this type of coverage.
The highest quality health insurance plan can be found with short term medical
Cost of Short Term Medical Insurance
Short term medical insurance averages about half of the price of regular health insurance. The price is based on
sex, age, location of residence and policy details like deductible, co-insurance, optional coverage selected and
the method that you choose to pay the premiums. Since coverage is based on age, a 64 year old might expect to pay
$300 per month while a 24 year old might pay less than $60 per month.
Eligibility for Short Term Medical
Not everyone qualifies for this type of coverage. Eligibility is not guaranteed by any state or federal law.
Certain groups do not qualify: 1) residents of MA, NJ, NY, and VT, 2) people with significant prior medical
conditions, and 3) applicants over age 64. Applicants who have difficulty qualifying for a specific short term
medical insurance should check the article "Short Tem Medical Insurance for Special Situations" posted at
MedSave.com for possible alternatives.
Short term medical insurance is exempt from many federal and state laws that pertain to other health plans like HIPAA and some mandated benefits like maternity coverage. This is
another reason for the lower costs.
Short term medical insurance is not COBRA coverage and is not subject to COBRA health insurance laws. Many
people use short term medical insurance as a lower cost alternative to COBRA coverage. For more information on this
topic and a list of Frequently asked questions about COBRA coverage and COBRA alternative coverage, see COBRAplan.com.
Health Savings Accounts
Short term medical insurance policies are probably not intended to be used with health savings accounts,
although there is no tax reference for or against this position. Some applicants have used high deductible short
term medical insurance policies with a health savings account, but they do so at their own tax risk because the
insurance companies have stated that the plans are not HSA-qualified. Future federal legislation might open up this
Choice of Short Term Medical Insurance
Most states have a handful of short term medical policies available to individuals. Some states have only one or
two companies that offer this coverage. A state-by state listing of the most popular short term medical insurance
plans can be found at MedSave.com.
Preferred Provider Organizations (PPO)
Most health insurance plan in the US use preferred provider organizations to manage costs. Short term medical
insurance plans do not use PPOs. You may use any doctor or hospital of your choice anywhere in the US. Some plans
like Assurant include Canada and Mexico. Assurant and Celtic are the only short term medical insurance plans to
offer optional access to the Preferred Health Care Systems national PPO network. (PHCS.com). There is no cost for this option, and it might help save some out-of-pocket costs
for bills that are lower than the policy deductible.
Most people pay month to month through pre-authorized debit or credit card payments. Canceling coverage is
simply a matter of withdrawing the payment authorization. Significant discounts in price are available by
pre-paying months n advance but there is no refund offered if you cancel early.
Popular Insurance Companies
American Health Shield is the most popular national plan for young people under age 30, according to statistics
compiled by Freedom Benefits Association and OnlineAdviser service. Assurant Health (FreedomBenefits.net), formerly known as Time Insurance and Fortis Health, is the nation's most
popular plan for applicants over age 40. An interesting point about Assurant is that the company does not allow
its online enrollment Web site to be listed alongside of competitors for fear of adverse selection based on
price without considering the quality differences between plans. Many people would argue that the primary
benefit of online insurance enrollment is the ability to compare price and coverage quickly. Other interesting
options are Celtic Insurance and Select STM from Health Plan Administrators (HPA). Blue Cross Blue Shield
Associations offer this coverage.
Most short term medical insurance policies are issued online at sites like MedSave.com. Online enrollment is
fast, reliable and secure. Policies and ID cards are either printed out at the time of enrollment or mailed on the
next business day. Enrollment support for any of the plans mentioned in this article is available online or
toll-free telephone through OnlineAdviser service.
About the author
Tony Novak, MBA, MT, has personally handled questions from more
than 200,000 users of OnlineAdviser service over a period of more than seven years; many of these questions were
about short term medical insurance. "OnlineAdviser" is a trademark of Freedom Benefits