Low-cost health insurance policies are also often referred to as short-term health insurance policies because they are only available for a limited time period. But the good news is that the validity of such policies was extended from the previous three-month limit up to three years in recent times.
This is obviously a great way for those who cannot afford regular health insurance or aren’t provided one by their employer to get some form of coverage. The Department of Health and Human Services says that plans for low-cost health insurance policies offer premiums that are almost one-third cheaper than those that comply with the Affordable Care Act. For comparison, the average monthly premium for an unsubsidized Affordable Care Act plan was around $393, while a short-term insurance policy only costs about $124 per month.
However, it’s not as simple as it seems and critics warn that a short-term health insurance policy may not be worth getting at all. And when individuals who find themselves facing a wall of medical bills realize that their health insurance isn’t actually able to help them at all, this can drive them to financial ruin. Simply put, you get what you pay for.
To get a better idea of whether you should opt for low-cost health insurance or not, here are the things you should consider:
The Downside of Low-Cost Health Insurance Policies
Less Extensive Coverage
While premiums for short-term health insurance policies were much lower, the coverage isn’t as extensive. For instance, such plans don’t cover services related to mental health, substance abuse, or prescription drugs, according to a study by the Kaiser Family Foundation. Other benefits that are usually excluded in low-cost healthcare plans include emergency services, preventative care, hospitalization, rehabilitative services, laboratory services, contraceptives, counseling, and pediatric services.
No Maternity Care
However, more devastatingly, the same study also found that the chances of getting maternity care through such policies were slim to none. Given that labor and newborn care charges for a normal delivery land somewhere over $30,000 – this is not ideal. Even worse, pregnant women who need a cesarean section will have to fork over more than a whopping $50,000 as hospital charges!
No Coverage for Pre-Existing Conditions
The Affordable Care Act mandated that pre-existing medical conditions must be covered under policies that comply, which meant people could get treated for long-term and chronic conditions without worrying about money. However, short-term health insurance policies don’t come under this rule, putting the 133 million American that the Department of Health and Human Services says have a pre-existing conditions at a disadvantage.
Why People Choose Low-Cost Plans
So, you may be wondering why people still opt for low-cost health insurance policies if they only offer limited coverage. Well, the reason why they’re still popular is in the name itself. For one, a lot of people look at these policies as a placeholder if they’ve recently left a job and are waiting to find another so they can be eligible for employer-sponsored healthcare. Certain companies also have a waiting period before which new employees can sign on to the company healthcare. This is why these policies were originally only intended to last 3 months.
However, for those for whom employer-sponsored healthcare isn’t an option, low-cost healthcare may be the only thing they can afford. The Centers for Medicare and Medicaid Services said that premiums for Affordable Care Coverage have gone up significantly in the past few years, which puts them out of financial reach for some people.
While the policy has subsidies for low-income earners, there is still a grey area where certain people don’t earn enough to afford the unsubsidized premiums but also don’t earn low enough to qualify for the subsidies. For these people, the announcement from the Department of Health and Human Services allowing short-term healthcare policies to be availed for a year and extended for 2 more afterward may have provided some relief.
This is especially if they are generally healthy, because they may not need to go to the doctor that often anyway. Plus, such health providers can even drop those who become sick, according to the Georgetown University Center on Health Insurance Reforms.
Short-term health policies can also be a great option for those who retire early if they do not yet qualify for Medicare, those who missed out on open enrollment, or someone who qualifies for a special enrollment period but is waiting for coverage to begin.
Other Things to Look Out For
Charges May Vary
Despite being called “low-cost”, there’s no way to be sure of how much you will end up spending on a short-term health insurance policy since things like co-payments vary drastically among insurers. Plus, policyholders may have to pay more depending on age, gender, and overall health.
According to the Department of Health and Human Services, there is no guarantee that consumers will be able to buy insurance through the Affordable Care Act if their short-term policy ends before the open enrollment period begins and they decide not to renew or are dropped by their policy provider.
While the federal penalty for not having health insurance was eliminated in 2019, individual states and jurisdictions may have their own health insurance mandates. Since short-term health insurance policies don’t meet the requirements to count as health insurance under the Affordable Care Act, you may be subject to some penalties after all. For instance, states such as New Jersey, Massachusetts, Vermont, and the District of Columbia have state-level penalties for having no insurance.
Cap on Lifetime Payments
Most short-term health insurance policies have limits paid on claims made for services over the lifetime of the policy. Therefore, a person may end up having to pay a substantial amount of money out of their own pocket despite having a short-term policy that actually covers their condition.
A Final Word
It may seem like short-term health insurance policies have more cons than they have pros, but that’s not to say that they cannot be the right choice for some people.
However, it is important that you thoroughly understand what you are signing up for. “Cheap” should not be your only criteria for picking a healthcare policy. In that case, you could actually end up paying much more than you anticipated when you find out later on that your low-cost policy does not have coverage for something that you need!