Should I Buy ACA or Short-Term Medical Insurance?

Many people ask this question thinking that ACA plans and short-term medical plans are comparable types of insurance. However, ACA-compliant insurance offers much broader coverage than short-term plans. You should always choose to purchase an ACA-compliant health plan if the option is available to you.

Keep reading to see the extensive differences between these two types of insurance plans.

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During Open Enrollment

The ACA Open Enrollment Period starts November 1, 2016 and lasts through January 31, 2017. During this period, you should purchase a health insurance policy that qualifies as minimum essential coverage under the Affordable Care Act (ACA), or "Obamacare," as it is commonly known. These types of plans are referred to as “qualifying health coverage” or "ACA-compliant health plans."

ACA-compliant plans are required under the law to offer certain benefits and services, and to fulfill specific requirements.

The following are true of all ACA plans:

1. They meet the standards of minimum essential coverage.

All ACA plans are required to offer 10 categories of services known as “essential health benefits.” These benefits include:

  • doctors’ visits,
  • ambulatory and emergency services,
  • hospital care,
  • mental health services,
  • prescription drug coverage,
  • pregnancy and childbirth,
  • lab services,
  • pediatric services,
  • rehabilitative and habilitative services, and
  • preventive and wellness services.

As a policyholder of a qualifying plan held throughout the year, you will not be subject to the ACA tax penalty for having insufficient coverage.

How Short-Term Medical Plans Differ

Short-term medical plans are outside the scope of the Affordable Care Act and do not count as minimum essential coverage. These plans offer short-term coverage of less than 3 months for costs resulting from unexpected injury or illness, such as emergency room visits, hospitalizations, outpatient surgery, and lab/X-ray fees.

By purchasing a short-term policy, you may still be subject to the ACA tax penalty for not maintaining minimum essential coverage. However, if you have a brief coverage gap of only 1 or 2 months, you can claim a “short gap in coverage” exemption to avoid the fee, provided you have a qualifying health plan the rest of the year.

A short-term medical plan is a great way to maintain limited health coverage during those gaps in full medical coverage.

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2. Coverage is guaranteed and renewable.

You cannot be denied ACA-compliant coverage due to health status, age, gender, pre-existing conditions, or other predictive factors. You also have the option to re-enroll in your same plan the following year, unless the plan is discontinued, in which case you will be offered a similar policy.

How Short-Term Medical Plans Differ

Short-term plans do not cover pre-existing conditions, they cannot be renewed, and they are not guaranteed issue. Short-term plans have these limitations due to their nature as gap-fillers for brief timespans when you would otherwise be uninsured.

If you purchase a health plan through the Marketplace and your estimated income lands somewhere between 100% and 400% of the federal poverty level (as determined by your household size), you may also be eligible for a premium tax credit.

3. Coverage begins only on the first of a month.

If you purchase an ACA-compliant plan through the Marketplace, understand that your 2017 coverage may not start right away.

  • If you enroll between the 1st and 15th day of a month, your coverage will start the first day of the following month (i.e. if you enroll on December 1, 2016, your coverage starts on January 1,, 2017).
  • If you enroll between the 16th and last day of the month, your coverage starts the first day of the second following month (i.e. if you enroll on December 16, 2016, your coverage starts on February 1, 2017).

You have until January 31, 2017 to enroll in a plan, but note that the last day to enroll to ensure that your new coverage starts January 1, 2017 was December 19, 2016. If you are enrolling after this date, you could face a coverage gap of up to 45 days.

If you will be uninsured during that gap, you can purchase a short-term medical policy to remain covered for unexpected injuries and illnesses until your ACA-compliant coverage begins.

How Short-term Medical Plans Differ

In most states, short-term medical insurance, underwritten by HCC Life Insurance Company, can go into effect the day after it is purchased. Note that some states have a 72-hour waiting period between the purchase date and the date the policy goes into effect for illness; coverage for accidental injuries that occur after the policy is effective is not subject to the waiting period.

Short-term medical plans are available much more immediately due to their purpose of covering unexpected short gaps in qualifying coverage. Unexpected situations can happen suddenly, so short-term plans allow you to secure coverage quickly while you determine your next steps for obtaining complete health coverage.

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Outside Open Enrollment

Outside the Open Enrollment Period, you need to first determine whether you qualify for one of the following unique circumstances:

  1. Special Enrollment Period or
  2. Medicaid or the Children’s Health Insurance Program (CHIP).

If you do qualify for one, then you can and should purchase a qualifying health plan that meets the ACA's minimum essential requirements.

However, if you do not qualify for any special enrollment circumstances, a short-term medical insurance policy is likely your only option for health coverage outside the Open Enrollment period.

In addition to coverage for unexpected illness and injury, Short Term Medical (STM), underwritten by HCC Life Insurance Company, offers:

  • a fast enrollment process,
  • no application fee,
  • no out-of-network penalties,
  • low copay at urgent care centers,
  • and a 10-day free look period.

Remember, short-term medical plans provide temporary coverage of less than 3 months. They do not provide minimum essential coverage as defined by the Affordable Care Act. Short term insurance does not cover pre-existing conditions, cannot be renewed, and is not guaranteed issue.

Review more complete benefits and exclusions by visiting the page for your state. Choose your state at hccmis.com/short-term-medical-insurance.

By purchasing an STM policy, you may still be subject to the ACA tax penalty for not maintaining qualifying coverage. You should consult your tax advisor to determine if the ACA tax penalty applies to your specific situation.

Get Short Term Insurance

Short Term Medical (STM) plans provide temporary, short-term coverage of less than 3 months.  STM plans do NOT provide “minimum essential coverage” as defined in the Affordable Care Act ("ACA" also known as "Obamacare").  STM plans also do not cover pre-existing conditions, cannot be renewed, and are not guaranteed issue.
Please review the policy for additional exclusions and limitations. By purchasing an STM, you may still be subject to the ACA tax penalty for not maintaining minimum essential coverage. You should consult your tax advisor to determine if the ACA tax penalty applies to your specific situation. 

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