Short term health insurance provides temporary coverage for a limited duration, while long term health insurance offers more comprehensive and extended coverage over an extended period, often spanning several years or even a lifetime.
You can sign up for short-term health insurance anytime during the year and purchase it from the insurer. However, short-term health insurance does not cover preexisting conditions, and the plans do not need to comply with the Affordable Care Act (ACA) requirements.
Long-term health insurance can be offered through an employer, the government, or the Health Insurance Marketplace. You can only purchase long-term health coverage during the Open Enrollment Period (OEP) or if a significant life change opens a Special Enrollment Period (SEP). Long-term plans must comply with ACA requirements.
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Stay Covered to Avoid Unexpected Medical Expenses
Health insurance coverage is critical for containing healthcare costs in the U.S. About 63% of people under age 65 have private insurance, while almost 28% have some form of public insurance.
Around 10% of the population struggles to pay medical bills. These bills can lead to more debt when people use credit cards or personal loans. Some people may end up ignoring late notices — which can lead to collections and poor credit scores.
Maintaining health coverage throughout the year, regardless of employment status, can help people avoid some of these debt issues. Short-term health insurance to cover unexpected emergencies can help bridge brief periods between long-term health coverage periods.
Short-term Health Insurance vs. Long-term Health Insurance
Short-term Health Insurance | Long-term Health Insurance | |
|---|---|---|
Enrollment | Year-round | Open Enrollment Period; Special Enrollment Periods |
ACA Compliance | Not compliant | ACA compliant if it is a Qualified Health Plan (QHP) |
Preexisting Condition Coverage | Not covered | Covered if it is a QHP |
Coverage Length | Up to 364 days | 365 days |
Renewal | Not guaranteed, but may allow renewal up to 36 months | Guaranteed renewability |
Costs | Generally lower premiums than long-term health insurance; may feature higher out-of-pocket costs | Generally, higher premiums than short-term health insurance; may feature lower out-of-pocket costs |
Short-term Health Insurance
This insurance helps provide limited protection if you cannot enroll in a long-term health insurance plan, such as if you’re between jobs or missed the OEP. Short-term plans are meant to provide basic coverage but are not required to offer the same scope of coverage as a long-term insurance plan.
Your state determines your short-term health insurance length and renewal options, which vary widely. In some states, you may not be able to renew coverage. Most states prefer you to only use short-term insurance for a few months or other limited periods. You can enroll in short-term health insurance at any time, not just during an enrollment period.
Short-term plans can be less expensive upfront than a long-term health insurance plan but do not cover preexisting conditions or offer the same free preventive care benefits.
Eligibility
An insurer reviews your medical history, including preexisting conditions. Based on your information, the insurer can deny you coverage for those conditions or coverage altogether or charge you higher premiums for a short-term health insurance policy.
Long-term Health Insurance
Long-term health insurance helps you pay for routine healthcare and unexpected medical bills from an accident or injury. It usually refers to major medical insurance or qualified health plans.
You can enroll in private insurance companies through an employer or the federal Health Insurance Marketplace. Or you can enroll in a government long-term health insurance plan such as Medicare or Medicaid. Plans differ in coverage levels, pricing, and your share of costs. However, federal law requires these plans to offer certain benefits or make some care free of charge.
Enrollment can only occur during the annual OEP or a SEP after a qualifying life event, such as a baby’s birth, divorce, job loss, or marriage.
Eligibility
Anyone is eligible for a long-term health insurance plan, even those with preexisting conditions or high healthcare costs. Insurers cannot reject you or charge you a higher premium.
Enrollment Periods
- Open Enrollment Period (OEP): November 1-January 15 for Marketplace plans; employers can set their own open enrollment periods.
- Special Enrollment Period (SEP): Specific life changes allow you to enroll in a new long-term plan, including changes in household or residence, a loss of job, or individual coverage. This may also apply to employer plans.
- Other Enrollment Periods: You can enroll in Medicaid at any time if you meet the eligibility requirements, and you can enroll in Medicare when you turn 65.
Benefits: Short-term Health Insurance vs. Long-term Health Insurance
Short-term and long-term insurance may provide very different benefits, so it’s important to determine which procedures, visits, and conditions are covered and what’s excluded.
Short-term Health Insurance | Long-term Health Insurance | |
|---|---|---|
ACA Compliance | Not compliant | ACA compliant if it is a Qualifying Health Plan (QHP) |
Preexisting Condition Coverage | Not covered | Covered if it is a QHP |
Affordable Care Act (ACA) Compliance
ACA-compliant plans that are qualifying health plans must cover the following:
- Preexisting conditions
- Many preventive services for free
- Young adults until age 26 on a parent’s plan
- Claims for essential health benefits, without limiting to yearly or lifetime coverage expenses
ACA-compliant plans cannot cancel your coverage if you or your employer made an honest mistake on your application. You also have the right to appeal any coverage cancellation or claim denial.
Short-term health insurance plans are not required to comply with the ACA, so they may not cover preexisting conditions, cover young adults, or offer preventive care for free. However, they may offer urgent and emergency care, office or specialist visits, and immunizations in combination with a copay. Some states have unique requirements — for example, Washington requires short-term health insurance to cover mental health care and prescriptions.
Preexisting Condition Coverage
ACA-compliant plans must provide coverage for preexisting conditions you had before the start date for new health coverage. Preexisting conditions are health issues such as diabetes, cancer, or pregnancy. The insurer cannot reject you, charge more, deny you benefits, or limit your benefits.
In contrast, short-term insurance can deny you a policy, charge more, or deny benefits based on your preexisting condition. This is because short-term health insurance does not need to comply with the ACA.
Length and Renewal: Short-term Health Insurance vs. Long-term Health Insurance
Short-term Health Insurance | Long-term Health Insurance | |
|---|---|---|
Coverage Length | Up to 364 days | 365 days |
Renewal | Not guaranteed, but may allow renewal up to 36 months | Guaranteed renewability |
Short-term health insurance is meant to cover you for a very limited time period, not on an ongoing basis. Long-term health insurance is more comprehensive, with the option to renew annually.
Coverage Length
A short-term health insurance policy typically only provides coverage for less than 12 months or 364 days. However, states or insurers can set their own limits. Some may limit you to six months without a renewal option or three months without the ability to renew until 60 days have passed.
Long-term health insurance covers you for a year, whether purchased on the Marketplace or supplied by your employer. If you lose your job, your coverage may end early, but you can still retain coverage with COBRA.
Renewal
You can renew or extend a short-term policy for up to 36 months, or about three years. At least in theory — an insurer can limit your renewal period or not offer a renewal. In some states, you may not be able to renew, but instead must fill out a new application. In addition, if you develop a new preexisting condition while on a short-term plan, you may be denied coverage at renewal.
With a long-term plan, you can choose a new one at the open enrollment period or continue with your existing one. If you’re laid off or have another qualifying event, you can continue your existing coverage with COBRA continuation coverage for 18-36 months.
Costs: Short-term Health Insurance vs. Long-term Health Insurance
Short-term Health Insurance | Long-term Health Insurance | |
|---|---|---|
Costs | Generally lower premiums than long-term health insurance | Generally higher premiums than short-term health insurance |
It may seem easy to compare the monthly costs of two plans, but your total costs should incorporate how much you might pay out of pocket if an emergency occurs.
For example, short-term health insurance tends to have lower premiums for coverage, but the premium charged is based on your age, gender, and other factors. The insurer typically limits how much the company pays in benefits and which benefits are covered. The insurer may charge a higher deductible and could exclude preexisting conditions from any coverage at all.
As a result, if you’re dealing with diabetes while on short-term insurance, you may be paying all diabetes-related costs out of pocket. Here’s what those could include:
- Premium: Your annual or monthly payment to carry the insurance.
- Deductible: This is how much you must pay per year before insurance starts paying costs.
- Copays: Your portion of a doctor’s visit is often $10-$65.
- Coinsurance: The percent you pay for covered services.
- Maximum out-of-pocket limit: This is the most you’re required to spend for the year; after you hit this limit, you do not pay anything else.
- Lifetime maximum: The most the insurer will pay for your care; prohibited from ACA plans for essential care, but short-term plans do not have to comply with ACA, so limits may apply.
Advantages and Drawbacks: Short-term Health Insurance vs. Long-term Health Insurance
Short- and long-term health insurance policies have pros and cons, depending on your situation, medical history, and needs. Here are a few to consider.
Short-term Health Insurance
Advantages
- Emergency coverage: Unexpected medical bills can lead to catastrophic debts. Short-term insurance helps to limit or avoid this scenario.
- Lower premiums: If you’re young and healthy, a short-term health insurance plan may be one of the least expensive options available to you every month.
- Enroll at any time: You do not have to wait for a special enrollment period or a qualifying event to enroll in a short-term health insurance plan, and coverage may be able to start the next day.
- Discounted care: You may pay more to see a doctor or go to the ER than on a long-term plan, but less than without insurance. Insurers have negotiated rates and disclose your flat-rate copay upfront, such as $50 per doctor visit.
Drawbacks
- Preexisting condition issues: You may be rejected by the insurer, required to pay a higher premium, or not have your condition covered if you have a preexisting condition.
- Limited coverage: Depending on the plan, it may only cover minimal medical visits and procedures, with limited benefit coverage outside of these events. Short-term plans may also require preauthorization.
- Higher out-of-pocket costs: You may pay more in deductibles, copays, coinsurance and other out-of-pocket costs than with a long-term health insurance plan. Short-term health insurance is cheaper, primarily if you do not need it.
- Lifetime limits: Short-term plans have lifetime dollar limits. Once your expenses exceed that amount, the insurer no longer covers any costs.
- May not qualify as Minimum Essential Coverage (MEC): Without MEC, you could be exposed to state-based tax penalties.
Long-term Health Insurance
Advantages
- Cost-saving benefits: ACA-compliant plans come with many money-saving benefits, including no-cost preventive care, no increased costs for preexisting conditions, and coverage for dependents.
- No lifetime limit: ACA plans do not have an annual or lifetime dollar limit for 10 essential benefits.
- Lower ongoing costs: Lower deductibles, copays, cost-sharing, and out-of-pocket costs depending on the plan
- Qualifies for tax credits and other financial advantages: Some plans qualify you for tax credits, while others qualify you for HSAs (Health Savings Accounts).
Drawbacks
- Higher premiums: Generally, expect your monthly premiums to be higher than with a short-term health insurance plan.
- Limited enrollment periods: You can only enroll in a long-term health insurance plan during open enrollment or if you experience a qualifying event, and coverage may not start immediately.
- Can be complicated: Understanding your fees, different “metal level” ACA plans, and in-network vs. out-of-network coverage can take a while to understand, much less compared to other plans.
- You’re stuck with the plan for a year: Once you select a plan, you cannot switch to a new one until the open or special enrollment period. Hastily choosing a plan can leave you with buyer’s remorse, particularly if you do not like your insurance provider’s customer service or feel frustrated by the claims process.
Which Should You Choose: Short-term Coverage or Long-term Coverage?
Short-term coverage can save money and provide peace of mind in specific situations, much like a band-aid before you enroll in a long-term plan.
Consider Short-term Health Insurance If…
- You missed the Open Enrollment Period and are not eligible for a Special Enrollment Period. If you cannot enroll in a health insurance plan because you’re between enrollment periods, short-term health insurance prevents you from experiencing a coverage lapse.
- You’re young and healthy. You do not take medications, rarely visit the doctor, and do not take many risks that could lead to an ER visit or expensive surgeries. You do not think you’ll need all the benefits of a long-term health insurance plan — or at least not for a short period of time.
- You’re between jobs. Perhaps you’re between jobs or moving from a college health insurance or a parent’s plan to a first job’s coverage.
- You’re financially strapped. You can only afford the low short-term health insurance premiums. However, you might also research whether you or your children qualify for your state’s Medicaid program.
- You’re waiting for Medicare coverage to begin. If you have just a few months before you qualify for Medicare coverage, a short-term health insurance plan could bridge the gap, particularly if you’ve just retired.
- You need coverage tomorrow. Some plans can start right away or the next day, which can bridge a gap of a week or two.
Consider Long-term Health Insurance If…
- You have ongoing healthcare needs. If you have ongoing or chronic health needs, long-term health insurance has more comprehensive benefits and is more likely to provide coverage for your care. Long-term health insurance can also offer services such as mental healthcare or chiropractic care, which short-term may not offer.
- You have a preexisting condition. You may not qualify for short-term health insurance if you have a preexisting condition such as cancer, diabetes, or pregnancy, or coverage for those conditions may be excluded.
- You want to contain routine and emergency costs more broadly. A long-term insurance plan limits your cost-sharing for everything from pregnancy to urgent care, including out-of-pocket maximums.
- You can get coverage through your employer, school, or government. Getting health insurance coverage through your employer or a program like Medicare or Medicaid often offers good coverage at lower rates due to group discounts.
- You have a family to insure. An ACA-compliant plan offers many preventive services and protections for babies, children, and pregnant women, including immunizations and well-baby visits.
- You qualify for a government plan. Medicaid coverage can help reduce healthcare costs for low-income, <a class=”wpil_keyword_link” href=”https://www.nashp.org/eligibility-levels-for-coverage-of-pregnant, and young Americans. Medicare or Medicare Advantage plans can help provide coverage if you’re 65 and older.
How to Get It: Short-term and Long-term Health Insurance
Generally, you’ll shop for these insurance plans through different venues. Compare plans by factoring in premium costs, copays and <a class=”wpil_keyword_link” href=”https://assurance.com/health-insurance/copays-deductibles-and-coinsurance, coverages, preexisting conditions, and other exclusions.
How to Get Short-term Health Insurance
- Understand any restrictions or limitations. On your state’s insurance department website, find out your state’s restrictions regarding the length of short-term health insurance coverage.
- Find a provider. Use your state insurance department website to discover who sells short-term insurance in your state.
- Ask the right questions. Ask the insurance provider or agent about available plans, exclusions and preauthorizations, all fees, renewal policies, and more.
- Shop around. Repeat step three with at least three providers to compare rates and coverage.
- Fill out the application. Answer application questions about yourself and your health history. Remember to be truthful or the insurer could deny your claims and cancel your coverage.
- Understand your premium. If your health history is acceptable to the company’s underwriters, prepare to receive a premium based on your age, health history, and other factors.
- Pay the premium to be enrolled. Keep an eye on when your short-term plan expires and any requirements around cancellation if you find a new plan.
How to Get Long-term Health Insurance
- Decide where to apply. You can shop for health insurance through a health insurance agent or a provider or use the Health Insurance Marketplace as an easy way to compare coverage and pricing or find out if you qualify for Medicaid.
- Ask the right questions. Using either online tools or by calling a provider or independent insurance agent, find out how the plan works. Ask about the available plans, the network, any exclusions and preauthorizations, all fees, prescription coverage, and more.
- Shop around. Repeat step three with at least three providers to compare rates and coverage.
- Fill out the application. Be sure to answer all questions honestly. Depending on your application, you may qualify for state-based medical coverage through Medicaid or tax credits to help reduce your costs.
- Enroll in your plan. In general, you’ll pay in advance, but your coverage may not start until the 1st of the following month. Then, you’ll pay the premium every month.
Putting It All Together
Short-term insurance can be a low-cost saving grace in the right circumstances. Just remember that this insurance option is not meant to maintain or improve your financial, physical, or mental health from year to year. For continuous healthcare, you’ll want to shop around and enroll in a long-term health insurance plan that meets your needs. Keep an eye on total potential annual out-of-pocket costs and not just up-front premiums.