Short-term vs. long-term health insurance options… You may not have heard of health insurance options being divided into these two categories. However, if you are currently looking for insurance, knowing which type would best meet your needs can help you in the long run. In this article, we will delve into what exactly these options cover, as well as the differences and similarities between them.
What Are Short-Term vs. Long-Term Health Insurance Options?
Short-term and long-term health insurance options have some important differences; each is used for specific purposes. Before we dive into those purposes, let’s start with some definitions, which mainly relate to the duration of your coverage.
Short-term health insurance plans often provide coverage for 1 to 12 months. Long-term health insurance options typically cover you for one year, or the policy period specified for your plan.
Short-term insurance is used by individuals who are bridging a gap or only need insurance for a short period of time. Those people can include:
- college students (especially international students),
- U.S. immigrants,
- early retirees waiting to be eligible for Medicare,
- U.S. citizens returning from living abroad,
- children coming off their parents’ insurance at age 26,
- people between jobs, or
- individuals who have applied for the Affordable Care Act (ACA) and are waiting for it to start.
Long-term insurance is likely the type of insurance you are familiar with, given that it is what many employers offer. Long-term insurance can also refer to what you can get through the Health Insurance Marketplace® as part of the Affordable Care Act (ACA).
What Are Some Short And Long-Term Insurance Differences?
Short-term insurance has both advantages and disadvantages. Again, it is a temporary product designed to fill in gaps. It exists to cover basic needs, such as sudden illness or injury, as well as urgent or emergency care.
It is flexible in that you can apply one day and possibly start coverage the following day. It is, generally speaking, less expensive than long-term insurance, and while it is not renewable, you may be able to enroll in two short-term policies each year. One of the reasons it is less expensive is that short-term insurers can deny coverage to individuals with certain health conditions, as these providers are not bound by the ACA requirements.
On the other hand, long-term insurance is required to meet ACA requirements; namely, providing 10 essential health benefits and covering at least 60% of your medical expenses. These long-term insurance contracts are often referred to as Qualified Health Plans. ACA insurance plans must also meet requirements such as limits on cost-sharing, deductibles, copays, and out-of-pocket expenses.
Because long-term insurance options are available to many people and are subject to specific guidelines, they are typically more expensive. However, long-term health insurance options usually have lower-priced deductibles and copays, as well as fewer out-of-pocket costs. They can also be renewed at the end of each term, unlike short term health insurance plans.
What Do Short-term vs. Long-term Health Insurance Options Cover?
Coverage is probably the biggest difference between short-term vs. long long-term health insurance options. This is where we strongly recommend taking the time to research and read through any policies you are considering.
Short term health insurance plans generally have the following coverage stipulations:
- basic doctor visits,
- urgent and emergency care,
- some prescriptions,
- no pre-existing conditions,
- no pregnancy or maternity care,
- no mental health care, and
- may cover preventative care.
Long-term insurance options customarily cover most of what short-term insurance options don’t. Nevertheless, please do your due diligence and read through the information on your prospective policies to make sure your unique needs are covered.
What Are Some Benefits Of Short-term vs. Long-Term Health Insurance Options?
So with short term health insurance plans covering so little, why might you choose this option? One reason is that they can fill in short gaps in coverage. Perhaps you missed the open enrollment period and are now finding yourself without any coverage. Something is, in many cases, better than nothing.
You are also able to cancel short-term insurance without a financial penalty. This way, when you do get long-term insurance coverage, you do not have to pay for both simultaneously. Additionally, if you will only be in the United States for a few months, you can obtain some basic short-term coverage for that time period.
Often, long-term health insurance options offer better value because they typically cover more services and prescriptions, have lower deductibles and copays, and may also provide additional benefits, such as discounts on gym memberships, dental, vision, and hearing coverage, or life insurance.
What Are Your Next Steps?
As we have mentioned throughout this article, selecting the best option for you may require some research and reading of policies. Choosing an insurance plan at random can leave you without vital health coverage. Your health, and that of your family, is important to maintain. As the old adage goes, “If you don’t have your health, you don’t have anything.”
Knowing what you can afford to pay for your health insurance is an important part of setting up and sticking to a budget. We all need some form of health insurance, but it can be challenging to determine which plan makes the most financial sense for you.
At Iron Point Financial, we can help you look at your budget and see which health insurance premiums fit well within your overall financial plan. In that personalized process, we will discuss your unique goals, current financial status, and various investment, insurance, and retirement options, covering the major areas involved with financial planning. That’s because we want you to be healthy both financially and physically.
If that sounds like something you’re interested in, why not schedule an appointment today to meet with an Iron Point Financial Certified Financial Planner® (CFP)? We’re ready to discuss your finances and values, and explore how we can help support both your financial and physical well-being. Why not call us today?
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Iron Point Financial is here to empower you to secure a brighter tomorrow. We operate physical offices in Grove City, PA and Greenville, PA.
We primarily serve residents of Pennsylvania, Ohio, West Virginia and Florida but we also have security registrations for 22 other states across the continental USA.
