With the number of self-employed workers on the rise, finding affordable and comprehensive health insurance has become increasingly challenging. Short term health plans have emerged as a potential option to bridge the coverage gap, providing temporary insurance for those transitioning between jobs or waiting for employer benefits to kick in. However, these plans also come with limitations and are not right for everyone. This article examines the pros, cons, and key factors to consider when evaluating short term health plans for self-employed workers in 2023.
The Rise of the Self-Employed Workforce
Recent years have seen a significant increase in non-traditional work arrangements driven by both worker preference for flexibility and companies utilizing more independent contractors, freelancers, gig workers and temporary staff. According to a 2022 study by Upwork, nearly 36% of U.S. workers now identify as independent or self-employed, up from around 31% in 2019. This amounts to approximately 59 million self-employed individuals nationwide.
For many of these self-employed workers, finding affordable yet comprehensive health coverage can be extremely challenging. Without access to employer-sponsored group plans, they must navigate the complex individual insurance marketplace which often comes with higher premiums, fluctuating rates year-to-year, and fewer plan options. As a result, nearly 25% of self-employed workers remain uninsured.
Understanding Short Term Health Plans
Short term health plans, sometimes called short term limited duration plans or temporary health plans, were initially created to fill gaps in coverage for those transitioning between jobs or other life stages. As the name implies, these plans provide coverage for a short window – typically under 12 months.
The plans are not considered major medical insurance. Instead, they provide basic coverage for doctor visits, emergency care, and hospitalizations resulting from accidents or illness. Coverage amounts, deductibles, and copays can vary significantly between plans.
Unlike Affordable Care Act (ACA) plans sold on the public exchanges, short term plans can also deny coverage or charge more based on pre-existing medical conditions. The plans do not have to cover the ACA’s list of essential health benefits like maternity care, mental health services, or prescription drugs. However, some short term plans do offer options like pharmacy or accident benefits for added fees.
Benefits of Short Term Health Plans
While short term health plans do not provide as robust coverage as ACA-compliant plans, they offer some potential benefits for self-employed individuals including:
Lower monthly premiums: Because short term plans cover less, monthly premiums are often significantly lower. This makes short term plans more affordable for those who may be unable to pay the premiums associated with comprehensive major medical insurance.
Flexible terms: Short term plans allow applicants to choose the exact length of coverage they need from as little as 30 days up to just under one year. This allows self-employed workers to match their coverage to specific projects or contracts.
Quick underwriting process: Short term plan applications generally only require answering some medical history questions. Coverage can often be approved rapidly sometimes in as little as 24 hours. This quick underwriting provides faster access to healthcare compared to major medical plans.
Renewability: Many short term plans allow policyholders to renew their coverage for up to 36 months. This means those in need of coverage for an extended time can potentially renew rather than reapplying.
Drawbacks of Short Term Health Plans
There are also several important drawbacks and limitations to consider with short term health plans:
Pre-existing condition exclusions: Unlike ACA plans, short term plans can exclude coverage for pre-existing medical conditions like diabetes, cancer, asthma, or anything for which you have previously sought treatment. Only medical issues that arise after the short term policy goes into effect will be covered.
Limited benefits: Short term plans often place dollar limits or caps on certain benefits and services. Once the limit is reached, the policy will no longer pay for that service even if it is medically necessary. They also do not cover some essential health benefits.
Potential balance billing: With short term plans, you may end up being balance billed by out-of-network providers. This occurs when you are billed the difference between what the provider charges and what your insurer reimburses them. Out-of-network charges are common with these plans.
No income-based subsidies: Unlike ACA plans, short term health plans do not qualify for income-based financial assistance to help pay premiums or out-of-pocket costs. The full premium and any deductibles or copays are paid out-of-pocket.
Periods of no coverage: While short term plans can offer renewability, gaps in coverage can still occur if you fail to re-enroll and renew on time before your term expires. This can leave you uninsured until you apply and get approved for a new plan.
Key Factors for Evaluation
When considering short term health plans, self-employed individuals need to carefully evaluate some key factors including:
Coverage inclusions: Carefully review what services are covered as well as benefit caps and limitations. Make sure the plan includes coverage and benefits that align with your healthcare needs.
Network size: Check if your preferred doctors and hospitals are in-network providers. Using out-of-network services will incur higher out-of-pocket costs.
Premiums and deductibles: Weigh monthly premium costs against how much you will pay out-of-pocket for deductibles. Copays or coinsurance when receiving care before meeting the deductible. Make sure total costs align with your budget.
Exclusions and limitations: Pay particular attention to any pre-existing condition exclusions as well as waiting periods for certain services. Also confirm the plan covers any prescriptions you may need.
Ease of renewal: Understand the renewal process and timeline to avoid any gaps in coverage. Mark renewal deadlines on your calendar well in advance.
Consumer protections: Realize short term plans do not have to comply with all ACA consumer protections like preventing lifetime or annual limits on core benefits.
Reading the Fine Print
Those interested in short term health plans will need to read the fine print closely to fully understand what is and is not covered. It is also advisable to consult with an insurance agent or broker. Who can help explain plan differences and align coverage with your specific healthcare needs and budget.
The plans may be a quick and affordable solution for some like healthy individuals needing coverage for a short period of time. But the limitations leave others at risk of being underinsured and facing unexpectedly high medical bills. For those with pre-existing conditions or ongoing medical needs. An ACA-compliant major medical plan may be the safer choice despite the higher premiums.
The Future of Short Term Health Plans
The demand and availability of short term health plans is expected to remain strong in 2023. The plans can provide a coverage stopgap for those in transition. However, some consumer advocates argue short term plans undermine the ACA exchanges and put consumers at risk of being underinsured. There is ongoing debate around whether and how to regulate short term plans at both state and federal levels.
As self-employed work continues to increase, many will find themselves shopping for individual coverage like short term plans. When evaluating options, understanding how short term plans are designed. Their limitations, and if they align with your specific healthcare and financial needs is critical to making an informed insurance decision. With a little research and expert help, self-employed workers can find coverage to successfully bridge short term gaps.
Best Guide: Blue Cross Blue Shield