Short Term/Temporary Health Ins.- Buyer Beware!

Short Term Major Medical (STMM) coverage, sometimes referred to as Temporary Major Medical, can be an ideal solution to a specific, health insurance related challenge.  However, changes brought upon by the Affordable Care Act (ACA) have significantly altered the rules, restrictions, and considerations relative to the purchase and reliance upon STMM coverage.  Here is an analysis of STMM in the interest of arming interested buyers with the information they need to make an informed decision…

STMM coverage has historically, and to a large extent still is, an ideal health insurance solution for the following situations:
  1. In between jobs (an excellent alternative to COBRA)
  2. College graduates
  3. College students no longer eligible for parents’ coverage
  4. A bridge to Medicare eligibility
  5. Proof of health insurance when needed
And because STMM is both temporary (usually from 1 to 12 month durations, limited to 6 months in some states), and in most cases, subject to some level of underwriting, the premiums tend to be significantly lower than permanent/renewable health insurance.  However, like a consumer product purchase, the buyer needs to understand precisely what they are buying, and be aware of both the OPEN and SPECIAL enrollment periods that now define when an individual can purchase permanent/renewable individual coverage.
The Affordable Care Act (ACA) has profoundly altered the health insurance marketplace, in a myriad of ways.  Here are the most important considerations relative to the ACA and STMM coverage:
  • STMM does not meet the ACA’s “minimum essential coverage” criteria, thus individuals covered by STMM are subject to the ACA’s  individual mandate penalties (for 2016 and 2017, the greater of $695 or 2.5% of income);
  • A loss (or expiration) of STMM coverage does NOT allow for a special enrollment opportunity. So a loss/expiration of STMM coverage midyear would NOT result in the right to enroll in permanent/renewable coverage within 60 days of loss of STMM coverage.  An affected individual would have to wait until the 2017 open enrollment period to get permanent/renewable individual coverage, incur a life changing event (e.g., marriage, birth, adoption), or become eligible for employer based coverage.
  • Because STMM coverage is not affected by most of the ACA’s rules/restrictions, it does not have to:
  • include coverage for the 10 essential health benefits
  • offer unlimited coverage without a lifetime benefit maximum limit
  • utilize community rating
  • cover preexisting conditions
  • issue coverage on a guarantee issue basis 
Much like you wouldn’t hire an accountant to do plumbing work, or purchase a blender to open a can of soup, know when and if STMM coverage is the right fit for your health insurance needs!