January 1, 2010

Q: I recently read a suggestion you gave to a reader to purchase Basic Health Insurance in order to cover pre-existing conditions. However, when I followed the link provided in your column, the Basic Health Insurance page warned that it should only be purchased in combination with other insurance, such as Short Term Insurance. I don't understand why this is necessary. And isn't Short Term by its very name intended to be used as a temporary fix?

A: In reality, almost all health insurance policies purchased by individuals are a "temporary fix".  Remember that the large majority of people obtain group health insurance through employers or associations or through public programs like Medicare and Medicaid.  The average life of a health insurance policy is less than one year and less than 2% of individual health insurance policies last more than two years.  We purchase individual health insurance only until a better deal comes along; in the large majority of cases a better deal is only a matter of months away.

The terms "Basic Health Insurance" as well as "mini-med" and "limited benefit policy" refer to health insurance that is not designed to cover the whole amount of a medical bill.  They can be used to supplement other coverage or as a "starter" coverage when other insurance is unavailable or unaffordable.  In the case where coverage is needed for pre-existing medical conditions, Basic Health Insurance (www.Basichealthinsurance.net) is the only policy that offers this benefit for policies that have been in force for more than six months.  In addition, since Basic Health Insurance allows you to use any doctor and pays a cash benefit to the policyholder regardless of other insurance, this is an easy way to supplement the out-of-pocket risks left by other health insurance.

In contrast, the term "Short Term Medical Insurance" means a major medical insurance that is designed to cover the entire amount of catastrophic bills above the chosen policy deductible and any required co-pay.  Despite the name, short term medical insurance policies can be in force for up to three years and subsequent policies can extend the coverage period even longer.

Ideally, the two types of health insurance coverage are used together in combination to provide the most complete coverage, especially where pre-existing medical conditions are involved.

Granted, the terminology used in health plans can be confusing.  When in doubt, get a personal recommendation from OnlineAdviser service.  This is a free service and can help avoid a misunderstanding later.


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