What Employee Benefit Managers Should Know About Short Term Medical Insurance
Employee benefit managers are often called up on to be problems solvers with regard to the shortcomings of group health plans. A chief executive may request that health insurance be started early for a newly hired key employee. In other cases, employees may request assistance determining how to best cover their child who has moved out-of-state to attend college. Employee outplacement programs typically include a discussion of health coverage options under COBRA and the less expensive alternatives. In each of these cases, a working knowledge of short term medical insurance is a great asset to the employer organization.
We recognize that medical coverage is the principal employee benefit concern for most employees and that group health coverage does not always provide the best solution. This article is meant to provide a brief summary of short term medical insurance for employee benefit managers who may occasionally receive a question on this topic.
Advantages and Disadvantages
There are seven primary advantages of short term medical insurance: 1) this liberal major medical insurance is valid throughout the United States with any doctor or hospital, 2) the cost is significantly lower than regular medical renewable insurance coverage, 3) fast electronic enrollment is available, 4) applications are automatically approved in real time with online application, 5) coverage starts immediately (usually at midnight after enrollment), 6) policies and ID cards are delivered electronically, 7) HIPPA continuity of coverage protection is preserved under the next employer-provided health plan.
The main disadvantages of short term medical insurance are: 1) no coverage is available for pre-existing medical conditions, 2) those with serious medical conditions are excluded, 3) pregnant women and their male partners are excluded, 4) coverage cannot be issued to employees in Massachusetts, New Jersey, New York, and Vermont.
Short term medical insurance is appropriate whenever the employee can answer "no" to the several medical questions on the application that screen for significant pre-existing medical insurance1. This insurance is not designed to provide management of ongoing medical issues or provide coverage to high risk applicants.
The best use is to provide immediate proof of coverage; short term medical insurance is the only type of health insurance that can provide this documentation.
Despite the name, some short term medical insurance policies may extend for up to three years. The average lifespan of all health insurance policies purchased by individuals is about twelve months. A typical short term health insurance policy lasts 3 to 4 months. Some people, especially students and young working people without employer-provided coverage, extend this coverage for extra years by stacking the policies back-to-back.
Availability and Portability
Short term health insurance is meant to be portable and is therefore ideal for job hunters, students and those making career changes. Coverage is available in 46 states plus the District of Columbia. Insurance laws in New York, New Jersey, Massachusetts and Vermont do not allow the sale of these policies within their borders. It is common for residents of these few states to purchase coverage while traveling. For example, a New Jersey resident may purchase insurance while vacationing in Pennsylvania and may keep this same policy for a year after returning home to New Jersey. Once a policy is issued, the coverage is valid with all doctors and hospitals in all 50 states.
Do not be overly concerned about choice of product. All policies provide basically the same protection. The biggest different between different brands of coverage is often price and there is no way to predict which carrier offers a better deal without pricing a few different options. Fortunately all of the better quality plans are listed side by side on Web sites like MedSave.com. It only takes a few minutes to price and compare all available options. The highest quality brand names are offered by Standard Security Life under the brand name "Secure STM". The only carrier to avoid is Time Insurance marketed by Assurant Health, State Farm and USAA. This company has suffered from a number of underwriting and distribution-related problems and an increase in consumer complaints in recent years.
The average monthly premium of a short term health insurance policy is about $126. A typical policy has a $1000 deductible and $1000 co-insurance. Coverage options like prescription drugs, dental and eye care are available but are not necessarily recommended or necessary. Since insurance must, by law, b priced based on the benefits paid out to policyholder, it is fair to assume that "you get hat you pay for" and that a higher priced policy provides richer benefits that the least expensive insurance.
Most policies are issued online. Advisers who are licensed insurance agents may issue this coverage manually but the time required for this manual service is usually not worthwhile for either the client or the adviser. Web sites like my affiliate MedSave.com specialize in issuing this unique type of coverage and issue tens of thousands of these policies each year. Since MedSave's launch in 1995, the OnlineAdviser service has addressed more than 55,000 questions from consumers, employee benefit professionals and financial advisers on every imaginable aspect of short term health insurance. These questions range from "Does this insurance cover...?" to "How much does it cost?" and "Does my doctor take this insurance?". In response to these questions, I published many self-help articles on the Web site that address many special situations.
1 While the insurance application should be privately by the employee, a benefit manager can pre-screen for eligibility by reviewing the medical questions. This topic is covered in the specific product review articles at MedSave.com.