Short Term Health Insurance

January 1, 2010


Users Guide


by Health Insurance                           Copyright 2006

Usage Restrictions:  A single copy of this e-book may be downloaded and printed for non-commercial purposes.  No part of this book may be copied or reprinted on any Web site or used for commercial purposes.  Multiple copies may be licensed for groups of employees, business association membership or other similar groups for a small fee.




Introduction and Background


Outline of Coverage


Special Situations

Legal Issues

Problem Solving


About the Author



Short term health insurance is a special type of low cost individual policy available in 46 states plus the District of Columbia.  It offers coverage for a specified period of time ranging from 1 month to 36 months.  It does not cover the cost of treating pre-existing medical conditions and is not available to those with significant medical problems.  But for the majority of Americans who qualify for this coverage, it offers the most liberal protection at a cost of less than half of traditional health insurance.


Introduction and Background

Most working Americans and their dependants are covered by employer-provided group health insurance.  Employers are not required to provide health insurance as an employee benefit but most offer some type of health plan.  Tax incentives provide an incentive for employers to offer a group health insurance plan, especially when employees pay part or all of the cost of the insurance.  Relatively few Americans purchase their own health insurance and less than one in a thousand pays for a single health insurance plan for more than a year.  Yet more than one in six people will have a gap in their permanent health insurance each year.  The breaks in coverage are primarily created by normal life events - graduating from high school or college, leaving a job, moving, etc.

Short term health insurance was originally developed as a way to offer protection to the 1 in 6 people who, at any given time, are in the process moving from one group health insurance to another.  In recent years the use of short term health insurance has expanded to include those who do purchase their own health insurance for long periods of time (self-employed people, employees of small businesses and those who are not employed).  The allowance of multiple consecutive short term policies (in most states) and the expansion of continuous coverage period to 36 months has also helped make short term health insurance a viable alternative to traditional insurance coverage.

Federal law ensures that all Americans are eligible for enrollment in at least one health insurance plan.  Despite this guarantee and the options available, more than 20 million Americans will be uninsured for a month or longer this year.  The most likely reason is that the definition of "available" used by the government vs. the consensus of public opinion are vastly different.  (Government measurements basically assume that a people will allocate 100% of their disposable income toward health insurance and even cash in other personal assets to pay for health insurance coverage.  We know that in most cases this is not true).  Current law also requires that an applicant spend down personal assets before becoming eligible for government-assisted health insurance plans.  So while, in theory, everyone has access to health insurance coverage, many are uninsured. Most of the uninsured are in life transitions where short term health insurance is available to cover the financial risks in the transitional period. 

More than 40 million American have used short term health insurance, yet relatively little is known about this insurance product and the reasons why it is becoming a more important part of the overall health care system.



American Medical Association (AMA) - referenced as the basis of standard medical care and treatment of medical patients in the United States

application - the written form requesting coverage that becomes part of the policy.  The application may be made on paper but most short term health insurance applications are submitted electronically.  An application may not be made verbally.

assignment of claim - the policyholder's right to transfer the right to receive payment under the health insurance policy to the provider.  Most doctors and hospitals request this method of payment for large medical bills because it is easier to get paid directly from an insurance company than to collect payment from a patient.  The policyholder is relieved of the task of submitting claims and usually is usually relieved of the responsibility to make co-insurance payments.

benefit period - the length of the policy, plus (possibly) an additional period of time if the insured is hospitalized when the policy ends.

center of excellence - a preferred or required medical provider for transplant services

child or children - unmarried dependant under age 21 (24 if a full-time student)

co-insurance - the portion of the bill that is more than the deductible but is still not covered by the insurance company.  Usually the maximum amount of coinsurance is $1000.  While medical providers may elect to collect this amount from patients, most do not.

co-payment - a medical service usage charge that is usually paid by the applicant at the time of  treatment.

custodial care - care that can be provided by non-medical persons typically including feeding and personal hygiene for a person under medical treatment.

deductible  - the total amount of medical charges accumulated from the starting date of the policy that is not covered by short term health insurance.

effective date - a policy starts at 12:01 AM (one minute after midnight) on the day after all of the application requirements have been met, or on a later date if you request a later effective date on the application.

emergency - a condition that may lead to serious jeopardy to health, serious impairment of bodily functions or serious dysfunction of an organ or body part.

experimental treatment - a medical procedure not recognized as the ordinary treatment by the AMA.

ID card - evidence of insurance that includes the name of the insured or policyholder, the policy number and the contact information of the insurance company.  Short term health insurance used paper ID cards that are frequently downloaded from the Internet at the time of application.  It is not necessary to have an ID card for each covered person in the family, but it is permissible to copy ID cards for this purpose.

insurance policy - a written contract governed by state law that promises financial benefits in the event of medical.  In most cases it is a consensual agreement because neither the insurance company nor the insured person are required to enter the contract with the other party.

insured person - a person listed on the Schedule of Benefits of the insurance policy.

ordinary and necessary - the usual course of medical treatment recommended by a doctor who is a member of the American Medical Association.

short-term - there is no specific definition of "short-term" but short term health insurance policies generally run from one month to thirty six months.

state mandate - a coverage or contract provision required under a specific state's laws applicable to policies issued to residents in that state.  In general, the more state mandates that apply, the more expensive the insurance.

pre-existing medical condition - a medical problem that existed before the insurance policy started.  In most cases the existence of the medical problem is evidenced by personal medical record indicating a diagnosis and dates of treatments.  The legal definition of this term may vary slightly in different states.  The cost of treating pre-existing medical conditions is not covered by short term health insurance.

underwriter - an employee  or agent of the insurance company who has the authority to accept or reject an application for insurance.


Outline of Coverage

Short term health insurance covers the cost of treating ordinary and necessary medical conditions.  Most policies require that treatment be in the United States.  All policies exclude the cost of treating pre-existing medical conditions.

While each policy has its own specific outline of coverage, the following is provided as a typical description of coverage:

  • Hospital Charges: average semi-private room rate, medical care and treatment
  • Outpatient Hospital or Ambulatory Surgical Center charges
  • Physician Services for treatment and diagnosis
  • Surgeon Services in the hospital or ambulatory Surgical Center
  • Assistant Surgeon Services: up to 20% of the surgeons benefit
  • Anesthesia Services: up to 20% of the surgeons benefits
  • Intensive Care: up to three times the average semi-private room rate
  • X-Ray Exams, Laboratory tests and analysis
  • X-Ray and Radioactive isotope therapy, anesthesia, oxygen, casts, splints, crutches, braces, surgical dressings, artificial limbs or eyes, rental of medical supplies
  • Blood or blood derivatives and their administration
  • Ambulance Services: $250 per emergency
  • Organ Transplants: $150,000 lifetime maximum
  • Acquired Immune Deficiency Syndrome (AIDS): **$10,000 lifetime maximum.
  • Mammography, pap smear and screens

Covered items may also be affected by state laws where the policy was issued.



The following items are usually excluded by a short term health insurance policy:

  • Any services that are not medically necessary
  • Eye exams, eyeglasses, hearing aids and surgery
  • Dental or orthodontic services
  • Treatment of foot conditions
  • Conditions resulting from an act of war
  • Maternity and newborn treatment prior to discharge, any infertility treatments or sterilization treatments
  • Spinal manipulation or adjustment
  • Services performed by family members or for which a charge would otherwise not be incurred
  • Medical care received outside of the United States
  • Services payable by Medicare or Worker's Compensation coverage
  • Cosmetic surgery, treatment for acne, hair loss or varicose veins
  • Transplant services to the transplant donor
  • Routine physical exams and tests, preventive care and immunizations
  • Experimental or investigational services
  • Learning disorders, attention deficit disorder, hyperactivity or autism
  • Mental or nervous disorders, depression or suicide attempt
  • Alcohol or drug dependency and disorders
  • Obesity treatments
  • Sleep disorders
  • Over-the counter-medications and prescription drugs
  • Participation in school or organized competitive sports or any high risk sport
  • Certain surgeries during the first six months

Again, the specifics vary depending on the specific policy and the state of issue.




Special Situations

When special circumstances applies, it makes sense to understand the differences in how various short term health insurance policies treat that situation.  Following are a few of the most common special situations that affect purchasers of short term health insurance:

pregnancy - no individual health insurance, including short term health insurance, may be issued while a woman is pregnant, nor may coverage may not be issued to the expectant father.  All persons - the mother, father and the new baby may be eligible for coverage following the post-partum exam that usually occurs six weeks after delivery.

non-US citizen - most short term policies issue coverage to US residents who are not citizens.  Avoid the American Health Shield brand in this case that is only available to US citizens.

diabetes - non-insulin dependant diabetics are eligible for  Secure STM brand.  Insulin dependent diabetics are not eligible for short term health insurance. 

overweight - None of the short term health insurance policies listed at MedSave.com inquire about weight of the applicant, however other companies not included on this list do decline overweight applicants.  Avoid policies from Assurant, State Farm, John Alden or USAA that all limit eligibility based on weight.




Legal Issues

Most health insurance companies use independent agents to take applications.  This has the effect of transferring some risk of faulty applications and resulting disputes from the insurer to a third party (the agent and his professional insurance carrier).  A purchaser has the right to rely on information from the agent with regard to the status of the application.  An agent does not have the right to modify the an insurance policy in any way, nor does an agent have access to private information held by the insurance company.


Problem Solving

Short term health insurance enjoys a better consumer reputation than traditional health insurance.  There are fewer consumer complaints and the issues tend to involve lower dollar amounts in dispute.

In the event that a few phone calls do not solve a policyholder's problem, the best approach is almost always to make a written complaint to the insurance company.  A written complaint should be made by certified mail and should fully identify the policy and provide full contact information.  Most health insurance companies respond to written complaints almost immediately upon receipt.  Most problems are resolved within a few days.


A listing of state insurance departments with their telephone numbers and Web link can be found at http://www.medsave.com/license.htm .  Most of the Websites have online consumer complaint forms.



MedSave.com - state-by-state listing of low cost short term health insurance plans.  Also includes links to low cost permanent health insurance, low cost group benefits and other insurance.

COBRAplan.com - information about COBRA coverage and COBRA alternative insurance.

healthsavingsaccount-HSA.com - extensive information about health savings accounts, including downloadable account enrollment forms.

About OnlineAdviser service

OnlineAdviser is a business service based in Newport, New Jersey that has helped more than 30,000 people since 1997 throughout the U.S. understand issues related to their health insurance.  OnlineAdviser handles e-mail requests from more than 50 people daily.




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