What do you do if you suddenly lose your Health insurance coverage? Should you take a huge financial risk and go without insurance for a few months or should you find a way to temporarily fill the gap? Whether you’re a recent college graduate or a worker between jobs, a Short-Term Health insurance policy might be the perfect solution.
Short-Term Medical insurance (STM) is most commonly used by new college graduates who find that they’re no longer covered under their parents’ insurance plan. Many college grads sign up for STM insurance to fill the insurance gap until they find a job with an insurance plan. This ensures that they’re covered if they suddenly become ill or have an accident.
Even grads planning to start a new job immediately after graduation stand to benefit from STM insurance. Most employers have a waiting period of up to six months before new employees are covered under their health plan. STM insurance can keep them covered until their new insurance kicks in.
An affordable alternative
STM is much more affordable than Individual Health insurance plans or coverage under COBRA (Consolidated Omnibus Budget Reconciliation Act). Similar to most major health plans, STM insurance includes a deductible and co-insurance charges. However, because these policies are limited in length from six to 12 months of coverage, they can offer significantly lower rates. STM insurance usually costs about 30 to 35% less than individual health coverage.
Another benefit to STM insurance? If you have this type of coverage, you generally aren’t required to use specified in-network providers.
Not just for college grads
Although widely used by new college graduates, many other consumers could benefit from this affordable, short-term coverage as well. For example, if you suddenly lose your job and your Health insurance along with it, STM insurance could keep you covered until you find a new employer. STM insurance might also be a practical solution for the following people:
- Independent contractors
- Seasonal or temporary workers
- Part-time employees
- Recently discharged military members
- Recently divorced people who are no longer covered through their spouse
- Workers between jobs
Let’s say you’ve been working for the same company for 12 years and your Health insurance plan covers you, your spouse and your two young children. Suddenly, your company goes through some changes and your position is eliminated. You know it can take up to 10 months to find a new job with the same level of benefits—but how will you cover your family’s health care costs in the meantime.
Obviously, going without Health insurance is not an option, especially considering that you have children under your care. Your first viable option is to enroll in COBRA coverage to continue your current benefits. If you are eligible for COBRA and lose your job either voluntarily or involuntarily, you can receive up to 18 months of extended coverage for yourself and your dependents.
The downside is that you’ll have to shell out some big bucks if you choose this route. Under COBRA coverage, you will be required to pay 100% of your Health insurance premiums in addition to an administrative fee of up to 2%. This can get extremely expensive for someone who is currently unemployed.
Your second option would be to purchase an Individual Health insurance plan to cover your family until you find a new job. This might be less expensive than COBRA, but still not what most would consider affordable.
However, if you choose to purchase a 12-month STM insurance plan instead, you would pay considerably less for a similar type of policy. If you are confident that you can find a new job within a year or less, STM insurance is probably the ideal option.
Additionally, STM insurance is considered “creditable coverage” under the Health Insurance Portability and Accountability Act (HIPAA). Under federal law, if you have a gap in insurance coverage longer than 63 days, you will lose your Health insurance rights as designated under HIPAA. That means if it takes you longer than expected to find a new job and in the meantime you are diagnosed with a serious illness or become pregnant, you might have a difficult time finding an insurer to cover you. However, if you have continuous health coverage under a “creditable” plan such as STM, you cannot be denied Health insurance even if you develop a condition.
A basic plan
The reason that STM insurance is so affordable is because it is an extremely basic major medical plan. Although STM covers basic medical services, these policies do not cover comprehensive expenses such as maternity benefits or treatments for pre-existing medical issues. Therefore, if you are pregnant or have frequent health issues or a pre-existing condition, STM insurance is probably not your best option. COBRA or individual major medical coverage would be a more appropriate plan for you. But if you are generally healthy and need to fill a gap in coverage for a year or less, STM insurance is a smart and affordable solution.