Short-term health insurance, a low-cost alternative to Obamacare

Two weeks into the opening of the Obamacare exchanges, some prospective customers are finding that the premiums they are being asked to pay are more than they’d anticipated or hoped for. A recent article in the San Jose Mercury News titled ‘Obamacare’s winners and losers in the Bay Area,’ featured several California residents commenting on the exchanges and the premiums.

Cindy Vinson and Tom Waschura are big believers in the Affordable Care Act. They vote independent and are proud to say they helped elect and re-elect President Barack Obama.

Yet, like many other Bay Area residents who pay for their own medical insurance, they were floored last week when they opened their bills: Their policies were being replaced with pricier plans that conform to all the requirements of the new health care law. 

Vinson, of San Jose, will pay $1,800 more a year for an individual policy, while Waschura, of Portola Valley, will cough up almost $10,000 more for insurance for his family of four…

Others of course are much more pleased, such as one 64-year old breast cancer survivor featured in the story who will see her monthly premiums decline from about $1,300 to just under $800.

While Obamacare is likely to help many, the fact is that younger, healthier people are seeing their premiums rise, in many cases becoming completely unaffordable. Those who find the new premiums beyond reach will hopefully look for alternative coverage types. I’ve discussed several here in the past, such as health sharing ministries and critical illnessaccident, and fixed benefit insurance.

There’s another alternative that I want to share, short-term health insurance. Unlike traditional health insurance, which typically runs for a 1-year term (or at least is intended to), short-term insurance has typically been used to bridge what are expected to be relatively short gaps in insurance coverage, such as when waiting for job-based coverage to begin. Policies can be for as short as 1 month to as long as 11 months, and can usually be renewed. 

The prices for short-term policies are typically much less than what can be found on Obamacare’s exchanges. For example, on the ehealthinsurance.com web site I found a policy in Virginia (where I live) for a 42-year old male (that’s me too) with a $2,500 deductible and 20% co-insurance for $69 a month and a 6-month term, offered by the IHC Group under the ‘Secure Lite’ name. That compares to premiums of more than $250 a month for policies with similar deductible and co-pay levels available on the Obamacare exchanges.

Needless to say, for that lower price you get fewer benefits and applicants can still be denied for pre-existing conditions. For example, the maximum amount payable for each night of a hospital stay is $1,000, which might be only half or even less for a hospital stay. In addition, once the policy expires it can be renewed,  but rates might be higher or pre-existing conditions that were discovered or occurred during the previous short-term policy won’t be covered in the new policy. The specific policy I mentioned here has a $750,000 benefit maximum, which should be sufficient for almost everyone but a few might still break through even that high limit.

Other plans are available at different price points that offer richer or poorer benefits, or at least a different mix. The United Health One Medical Value plan would have a monthly premium of only $58, but a higher deductible ($10,000) and co-insurance rate (30%), as well as a lower maximum benefit ($250,000). But it also appears to cover more of the hospital stay (after the deductible) than the IHC policy, and offer better benefits in other areas as well.

In the end, short-term health insurance can help to fill a need for people who just can’t afford premiums under Obamacare. It’s not a perfect product by any means, but the same is true of the insurance policies being sold on the exchanges. For people looking for an alternative to standard health insurance policies and for whom other choices like health sharing ministries or fixed-benefit insurance aren’t an option, short-term coverage that can be renewed regularly might be an option worth considering.

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7 Responses to Short-term health insurance, a low-cost alternative to Obamacare

  1. Dave says:

    As to the California voter, by 2012 it was clear that anyone with average intellect could not reasonably conclude premiums would go down when the Act mandated minimum coverages (ie, screenings, maternity, etc), forced ins. companies to allow 26yr olds to remain on their parents’ policy, eliminated medical history screening and removed coverage caps. Elections and failure to educate thyself has consequences. But the example of the cancer patient proves out the suggestion this Act is nothing more than wealth redistribution–mandating the young and/or healthy participate at extremely high premium rates (my 21 yr old goes from $95 to $225) to fund the population who are elderly and/or afflicted. Thanks Sean for the short-term alternative posting, as well. Proud member of Samaritan Ministries.

  2. Eric says:

    I have exactly this IHC policy – it works for me but I do not know if we can keep it. The jury is still out. My family has access to high quality, affordable health care in another country where we spend appreciable amounts of time, where we plan to retire, and where my wife is a citizen. Specifically, this is where we have our family doctor and where we take care of our maintenance and optional health care. During a family visit next month we are having our dental seen to, i’m picking up a new pair of glasses, and I’m getting an MRI of my right arm (<$100) – and we have insurance in that country (but it doesn't count here). I felt we were doing ok in the health care department.

    I purchased the short term policy for our time in the united states, because it made sense – we only go to an American doctor in case of emergency – precisely because they are so dramatically overpriced. The cheapest plan I can find in my state is over 4x more expensive than the IHC plan – and it provides benefits that we neither want nor use. I am glad that 'pregnancy' is covered – perhaps that would be useful if we can find a procedure to put my wife's uterus back in. I am glad that I can get a physical for free – it only used to cost me $15 before (not in the u.s.)

    In short, all this law says to me is that I have to pay some company a few hundred dollars a month for the right not to be a criminal in the united states – my citizenship is now privatized. I am now shopping for the cheapest possible policy based on the voting habits and political stances of the board of directors….. and to think, i used to be a democrat…. now I don't know, i just don't know. I now have to pay a private company for the right not to be a criminal – that is not an america of which i can be proud.

  3. Jean says:

    I really don’t know where to turn. I work in a kitchen in a school system for a private company who is dumping its coverage for the employees as of Dec 31, 2013. I work seasonally during the school year. I only make about 12,000.00 dollars. I don’t want to be under the affordable health care because I don’t need all of the parts that go with it. And I don’t agree with the socialism turn that this beautiful country is headed into. I barely make ends meet and don’t want my IRA touched, I worked hard for that for my retirement and funeral expenses.

  4. Tim Wohlford says:

    I lost my job in late August, and thought I had a job lined up for Sept 1. And when that fell thru, Oct 1. When it became clear that I was not gonna get that, or any job (Gov’t shutdown cancelled projects I work on), I took out a catastrophic plan.

    Trouble is that I can’t keep it — I’m over 30, and I took it out after Oct 1. So I’m stuck with a $380/mo policy. My weekly unemployment check is $350/mo., so I can’t afford it. Come to think of it, I couldn’t have done COBRA either.

    What this means is that Obamacare did nothing good — and even did some evil — to the problem of insuring the unemployed. This isn’t a new issue, and indeed, is a huge reason why people are uninsured. People like me aren’t eligible for subsidies, let alone Medicaid or Medicare. And the most irritating fact of all is that this would’ve been a situation that could’ve been easily fixed in legislation!

    So, I’m unemployed due to ACA-induced gov’t shutdown, and in a few days, uninsured due to ACA.

  5. Jefferson Foster says:

    If you are self employed or unemployed, the best option after reading the above seems to be high deductible short term coverage.
    Put the money you would pay for ACA insurance into savings and buy a high deductible short term policy every 6-11 months. Use you savings to pay for medical care until you reach your deductible.
    Dont forget to ask hospitals and outpatient diagnostic centers for discounts for cash paying patients. Because if you get a high deductible policy, i.e., $10,000 deductible, you will essentially be a cash paying patient.( until you reach your deductible)
    Make sure you change your withholding so the IRS does NOT owe you a refund. As taking your Tax refund (if you have one) is the only way ObamaCare can collect the fine if you do not buy an ObamaCare policy

  6. Kris says:

    Last yr my premium (2014) was 500 dollars and starting 2015 it would be 1200 $$ per month. More than 100 percent increase. They say it is better plan. Who cares? My dollar is better in my pocket. We are healthy, no doctors visit, still pay tax paid dollars to the insurance company. $1200 per month? If this is not exploitation then what else?

    • Denver Todd says:

      Be careful on who you point to when claiming exploitation. It is not the insurance companies that are exploiting you. They are operating completely within the guidelines of Obamacare. If there is exploitation, it is by the creators of Obamacare, which is the Democrat party. Not a single GOP politician voted for it.

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