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Short Term coverage Versus Permanent insurance (including Covered Ca)

If you're new to health insurance, it can be tough to compare short term and standard coverage.

What does "permanent" even mean?

 

How long is short term?

 

Great starter questions but there are some really important considerations beyond these in the new post ACA (Affordable Care Act) world.

We'll hit all the highlights so that you can make a good decision for your situation.

 

 

Get's get started


Bullet points on temporary and permanent coverage differences

 

Who doesn't like a condensed list when talking about health insurance!

 

Some key differences:

 

Short Term Insurance

  1. Medically underwritten - must qualify based on health (although simplified)
  2. Can enroll anytime of the year
  3. Can continue month to month up to a fixed period of time
  4. Much lower in monthly premium cost
  5. Will still have ACA penalty
  6. More catastrophic type coverage - few copays and generally no RX
  7. Fast effective dates - as early as midnight following online app submittal

 

Permanent coverage including Covered Ca

  1. Guaranteed issue - no medical qualification
  2. Must enroll during Open Enrollment or after a large life change
  3. Month to month with no max period of time
  4. Usually higher in cost unless a tax credit is available
  5. Will not have ACA penalty
  6. Range of benefit options from Bronze, Silver, Gold, and Platinum levels
  7. Effective dates on 1st of the month following enrollment or 1 month later depending on situation

 

Those are the big strokes in terms of differences.

 

There are some points there we want to understand before running your quote across short term and permanent plans.

We'll get into those now!

 

Open Enrollment and Special Enrollment

The permanent plans are not available any time of the year.

This is why many people get short term...they missed Open Enrollment.

Let's first see if permanent coverage is even an option.

 

Open Enrollment

 

For most people, they must enroll in a permanent plan from Nov 1st - Jan 31st of each year.

 

This is call the Open Enrollment period.

 

Always double check for the upcoming year since it might change going forward.

The earliest effective date is Jan 1st for open enrollment and you must enroll by Dec 15th in order to get this date.

If you miss Open Enrollment, then what?

There are SEP's or Special Enrollment Periods throughout the rest of the year.

 

These are triggered by large life events.

 

The most common are:

  1. Loss of employer based health coverage (including Cobra exhaustion)
  2. Move to/within State where it changes the health insurance options
  3. Family make-up changes such as marriage, divorce, birth, death
  4. Changes in legal status or immigration status

Those are most common.

 

There are some other minor ones and we're happy to go through your situation to see if you might qualify.

Our services are free at 800-320-6269 or run your instant quote here:

 

 

Short term is NOT subject to the Open Enrollment or SEP requirements.

You can apply for short term any time of the year.

Many people who miss Open Enrollment and do not qualify for an SEP, purchase temporary insurance to take them out to the next Open Enrollment.

This is commonly referred to as "Bridge" insurance and is one of the most popular uses of Short term.

Assuming we can qualify for permanent or short term insurance, then what?

 

How do we compare the two?


Tax Credit and Tax Penalty

Let's get to heart of the ACA law.

Again, this assumes we are in Open Enrollment or meet the SEP requirement.

One part carrot....one part stick!

 

First the tax credit!

If you're income is within a certain range, you may qualify for a tax credit to bring down the cost of ACA compliant plans.

This does not apply to short term plans.

The tax credit is an important consideration to address first.

You can run your own instant quote WITH tax credit calculation here.

The tax credit is on a sliding scale based on income. so the results can vary.

 

Here are the basic ranges (make sure to think of the entire household even if they're not enrolling - everyone that files together on one 1040 tax form)

 

 

If you qualify for a large tax credit and can enroll, Permanent coverage is probably your best option.

We can help you with this consideration at 800-320-6269. Our services are free.

 

If you are not eligible for a tax credit, there's one other consideration in terms of cost:

 

 

The tax penalty!

 

If a person does not have an ACA compliant plan, they may be subject to a tax penalty.

Short term does not help you avoid this penalty.

Here are the basic guidelines for the penalty:

 

 

So...assuming we can enroll, does short term make sense?

 

It depends.

 

Many people are enrolling in short term because the premium difference outweighs the tax penalty and they can't afford or don't want the full coverage of ACA compliant plans.

 

How do you calculate this?

 

Run your instant quote for short term.

Use a $5000 deductible plan as your benchmark.

 

Now run the quote for on-exchange plans and pick the Bronze level plan.

 

Those two are different in certain ways but they treat the really big bill similarly.

The short term plans generally cost 20-40% less than comparable deductible ACA plans

We then have to figure what the penalty will be for the year.

 

You may be able to get a 3 month (so 3/12ths) allowance from the penalty. More information on that here.

 

Many people simply can't afford the monthly premium but don't want to go without any protection.

 

They want catastrophic coverage only!

 

 

That's why short term has increased in popularity since 2014.

Enrollment has more than doubled each year.

 

 

The costs can be lower and the enrollment period can be more flexible. What about the benefits?


Short term versus Permanent plan benefits

 

There are some differences here.

 

It's best to think of Short term insurance as catastrophic or major medical coverage.

It's really designed to cover the big ticket items at a reduced cost for a limited period of time.

For many people, that's exactly what they want...and for good reason!

Here are some key benefit differences between the two options:

 

Short term benefits:

  1. Designed to cover major medical health care needs - hospital, surgery, ER, etc
  2. A few office visit copays based on duration of policy
  3. No outpatient RX coverage
  4. No preventative
  5. No maternity
  6. Can be waiting periods for pre-existing conditions

 

Permanent ACA benefits:

  1. Full list of 10 Essential Health Benefits but with different cost sharing levels
  2. Office visit copays depending on level of coverage (Silver and up)
  3. Outpatient RX depending on level of coverage
  4. Preventative covered at 100% in-network
  5. Maternity is covered - subject to deductible depending on level
  6. Now waiting periods for pre-existing conditions

 

Those are some highlights.

 

You can bring up the benefit summary and exclusions when you run your short term or permanent quote here.

Again, short term is for the big bill.

 

 It's legitimate coverage but really designed to keep monthly premium down by focusing on more catastrophic coverage.

 

We're happy to help you compare the options.

 

There are lots of moving pieces now with the tax credit, penalties, open enrollment, etc.


Call us at 800-320-6269 or request your Short Term Health Quote.


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About CalShortTerm

 

Short term health insurance can be a valuable tool to help protect people during transitional times.  Understanding the pro's and con's of short term insurance versus ACA compliant plans is Invaluable

We are Licensed California Agents with 20+ years of experience helping 1000's of California individuals and families.

Call us. you will be pleasantly surprised 800-320-6269

 
 
 
 
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