When Do Short-Term Health Plans Make Sense for Your Clients?

Short-term health insurance plans, offered by private insurers, cover individuals for a shorter period than the usual year-long coverage period of most major medical plans.

A client may be inclined to purchase this coverage due to the quick approval process or low premiums, but when should agents recommend short-term medical plans?

To understand the best scenarios and ideal clients for short-term health insurance, it’s important to know the basics of these plans, who is eligible for them, and what they cover.

Who Is Eligible for These Plans?

These plans are a great option for those seeking coverage for a shorter amount of time, an affordable safety net, or coverage in case of an emergency. Plans are available for as short as 30-day periods or up to 4 months. Clients who are eligible for most private health insurance plans may qualify for a short-term medical plan. There are some instances where clients may not be eligible.

Effective September 1, 2024, all short-term medical plans are limited to three months plus a one-month extension if requested. Short-term medical plans that are sold prior to September 1 are grandfathered in to the previous one-year maximum.

Who Isn’t Eligible?

Some groups of individuals may not be eligible for short-term health plans. The qualifications may vary by carrier and their underwriting standards, so make sure to double check your clients’ eligibility status with carriers before applying.

The following individuals may not be eligible:

  • Non-U.S. citizens
  • Individuals in the following states: CA, CO, CT, DC, HI, ME, MA, NJ, NM, NY, RI, VT, WA
  • Clients under another major medical insurance policy
  • Individuals who qualify for Medicaid
  • Men who weigh more than 300 pounds
  • Women who weigh more than 250 pounds
  • Pregnant individuals
  • HIV and AIDS positive individuals

Individuals in CO, CT, DC, HI, ME, NM, RI, VT, and WA are not eligible for a short-term health plan because the rules in order to sell these plans are so strict that no insurers offer them in those states. Clients in CA, MA, NJ, and NY are not able to purchase these plans because they are banned.

If your client qualifies for a short-term health plan, notify them of the benefits that come along with these plans!

Pros of Short-Term Health Plans

Short-term health plans can bridge coverage gaps between enrollment periods or employer coverage and make health care more accessible and affordable for more individuals. Many plans available from a variety of carriers are flexible options, and depending on what your client is looking for, you can certainly find the right plan for their needs.

Short-term health plans can bridge coverage gaps between enrollment periods or employer coverage and make health care more accessible and affordable for more individuals.

For clients without complex medical concerns or pre-existing health conditions, these plans can be valuable options. Rather than go uninsured, in case your client faces a health emergency, they can have some level of coverage — a safety net — to protect them from high out-of-pocket costs. The underwriting process typically goes quickly, and clients often have coverage in a short amount of time. These plans can also be canceled whenever without penalty.

What Do Short-Term Health Plans Cover?

Not all services and appointments covered by most major medical plans are covered by short-term health plans. For example, short-term health typically covers emergency room visits, some prescriptions, some doctor’s appointments, hospitalizations, and surgeries. There may be a limit on the number of covered doctor visits, benefits (e.g., certain amount per day in the hospital), or prescription drugs (e.g., certain prescriptions may only be covered if your client is an inpatient in a hospital).

Keeping the list of covered benefits smaller allows this type of insurance to be affordable. Unlike Affordable Care Act (ACA) insurance plans, short-term health insurance plans are not required to meet the minimum essential coverage standards established by the ACA. Because of this, there may be many coverage gaps that your client may not expect if they’re used to a traditional health plan.

What Isn’t Covered?

Dental and vision benefits are not included with short-term medical plans. It’s also important to note some short-term health plans may only provide a drug discount card instead of offering prescription drug coverage. Drug discount cards give the client access to certain prescriptions at a lower price, but there is no insurance reimbursement.

Pre-existing conditions, maternity and newborn care, as well as mental health services and substance abuse services are not covered under short-term insurance due to the underwriting process. Your client may be denied from enrolling in a plan if they cannot pass a brief health survey. If this is the case, an ACA plan may better suit their needs. Consider selecting an ACA plan from your client’s respective state or federal marketplace.

Now that you understand what is covered in a short-term health plan and how it differs from a marketplace plan, let’s discuss who may be the ideal client for a short-term medical plan.

The Best Clients for Short-Term Medical Plans

Individuals who are in between jobs may benefit from a short-term health plan if they no longer have employer coverage, need insurance quickly, and do not qualify for a premium subsidy through the marketplace due to their income level. Additionally, young adult clients who may be aging out of their parents’ plan may be good clients for short-term health plans, if they’re looking to buy more time before purchasing a major medical insurance plan.

Individuals who may be struggling to find health insurance due to expenses or options available may have an easier time with securing short-term health insurance.

Broadly speaking, individuals who may be struggling to find health insurance due to expenses or options available may have an easier time with securing short-term health insurance. Clients who missed the ACA Open Enrollment Period (OEP) and do not qualify for a special enrollment period (SEP) make excellent clients for short-term health insurance. Those clients who are older and waiting for their Medicare [Annual Election Period (AEP)](/blog/how-to-prepare-for-aep-like-a-pro “How to Prepare for AEP Like a Pro” may also find that having a safety net of coverage allows them to feel more comfortable.

Short-term health plans can be beneficial for certain individuals, however, not everyone can qualify for these plans.

Things to Be Aware Of

When discussing short-term health plans with clients, remember that clients must be able to pass the simple underwriting process and that costs may vary depending on age, location of the client, and the coverage level selected.

Clients looking for a short-term health plan should be aware of maximum limits. These plans will only cover a maximum number of expenses in one term. Terms can be as short as a month to a year, with the option to renew. Double-check with your client if they expect to have more significant medical concerns, and if so, consider a higher level of coverage.

Short-term medical plans are not considered qualifying health coverage. This means that, when short-term medical coverage ends, it does not create a SEP to join a marketplace plan. If an individual does want to join a marketplace plan, they may have to wait until the upcoming Open Enrollment Period (OEP). There may be a coverage gap if the short-term policy is ending, and they choose not to, or are unable to, renew.

Check out your clients’ options before deciding on a short-term health plan; they’re not always the most affordable option. These plans typically have higher deductibles than other health plans. If your client is eligible for a marketplace plan or qualifies for subsidies, an ACA plan may be more affordable and offer more coverage. In the case of client job loss, you could also consider COBRA insurance.

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If you’re looking to add more options and add value to your portfolio, consider adding short-term health plans. If you’re looking to start selling short-term health plans, get in touch with our sales team. We’re committed to helping you answer the difficult questions, come up with unique solutions for every problem, and connect with the resources you need.

Not a Ritter agent? Signing up is free and gives you access to a library of guides, resources, and tools, including our free CRM and enrollment software, Shop & Enroll.

Editor’s Note: This was originally published in March 2023. It has been updated following the STLDI Final Rule which was finalized March 2024.

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