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Texas health insurance Quotes  Texas Health Insurance Plans  Short term insurance versus long term insurance

Go Long or Short?  That is the question.

There is a lot of confusion today whether a short-term policy (coverage for less than six months) or a long-term policy is more appropriate once group coverage or C.O.B.R.A. has been completed.  It is important to understand the circumstances where short-term coverage is suitable and also the circumstances where long-term coverage is more appropriate.


Short-term coverage has several advantages.  Short-term coverage is easy to apply for; the application can be quickly completed, coverage can be effective at midnight following application submission, there are several deductible plans available, it is very price competitive and you have multiple carriers to select from. 


However, there is risk with short-term health insurance coverage that is often overlooked.  First of all, short-term coverage will not cover any preexisting condition.  Because short-term coverage is not medically underwritten, it does not provide benefits for any medical treatment, including prescription usage, which existed prior to the effective date of short-term coverage. 


Short-term coverage will eventually end and new coverage must be secured.  The important aspect to understand is that any benefit received during the short-term coverage will be considered a preexisting condition on the next short-term coverage and there will be no benefits for that condition.  The preexisting condition exclusion is not significant if you are dealing with a minor condition but if the condition is serious and requires a long-term treatment plan, short-term will only provide benefits during the term of the coverage and will not provide benefits after the completion date.  If the condition is extremely serious, the insured may not be able to secure a second short-term policy.


Short-term coverage does not meet the essential benefit requirements of the Affordable Care Act (ACA) and thereby the insured will still be subject to the personal responsibility fine.  With many employer sponsored group plans, short-term coverage is not considered creditable coverage and will not reduce or eliminate the preexisting condition waiting period which can be up to 12 months.  Employer sponsored group plans place a 12-month preexisting condition waiting period for each insured employee if the employee does not have up to 12-month of creditable coverage.  The insured employee must also avoid a 63-day gap in coverage.  Since short-term coverage is not considered creditable, once the insured is covered for 64 or more days, the previous creditable coverage is no longer valid.  The amount of creditable coverage is documented on the Certificate of Creditable Coverage that must be produced by either a long-term coverage carrier or the carrier for an employer sponsored group plan.


The most ideal situation for short-term coverage is when the availability of group coverage is known or the ACA open enrollment period is within six months and the insured needs to fill a specific coverage gap.  If an insured has a concrete employment offer but will need to work for 90 days before eligibility for the group plan is available, short-term coverage works very well to fill the 90-day gap.  The prior creditable coverage is not jeopardized by 90-days of short-term because the requirement to avoid a 63-day gap in coverage is met on the first day of employment not the first day of eligibility.  Since ACA plans have no preexisting condition waiting period and all coverage is guaranteed issue, the short-term coverage will provide benefits during the coverage period and then the insured can move to an ACA compliant plan without having to wait for benefits.  


Short-term health insurance coverage can be very beneficial in filling a specific, defined gap in health insurance coverage.  Short-term coverage should not be used in place of long-term coverage because the benefits such as ease of application and cost are not outweighed by the potential exposure.


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