cobra

The One Time Short-Term Health Insurance Makes Sense

Dan Rafter — Wed, 04 Nov 2015 11:15:30 +0000

Sarah O'Leary, founder and chief executive officer of national health care consumer advocacy group Exhale Healthcare Advocates, says that you should only pay for short-term health insurance one time — when you have no other options.

"We call them Swiss-cheese policies," O'Leary said. "They are less expensive because you get what you are paying for. I don't recommend that anyone stay with a short-term policy for long. And I recommend that people only pay for one if they have absolutely no other choice."

What Is Short-Term Coverage?

As the name suggests, consumers aren't supposed to take out short-term health policies for a long time. The insurers that market these policies pitch them as insurance that consumers can use to bridge the gaps when, for whatever reason, they are between more traditional, long-term healthcare insurance policies.

Insurers say that the policies are right for consumers who are between jobs or for those who missed their employers' open enrollment periods and don't want to go months without health insurance coverage. Consumers who think that COBRA temporary insurance — which allows former employees to continue their health insurance coverage after leaving their jobs — is too expensive might consider signing up for short-term health insurance, too.

O'Leary, though, said that short-term health insurance should always be treated as a last option for consumers. COBRA insurance, if consumers can afford the higher premiums, is a better choice. And traditional long-term health insurance policies always provide better coverage.

Lack of Coverage

Short-term health insurance policies have become even less appealing under the Affordable Care Act. Since they have so many holes in coverage, they don't even meet the Affordable Care Act requirement that consumers carry adequate health insurance. Those relying on short-term health insurance policies will be subject to the same tax penalties as people who have no insurance.

Short-term health insurance policies usually don't cover maternity care, treatment for mental illnesses, routine office visits, or preventative care. Because they don't follow the mandates of the Affordable Care Act, short-term health policies also aren't required to provide coverage for pre-existing medical conditions.

"Maternity care and delivery usually aren't included. That's a big one," O'Leary said. "That can cost you up to $40,000 if you don't have the right coverage. You don't see much preventative care covered, either. The holes in these policies can add up to a lot of money."

The Last Resort

When do these policies make sense? O'Leary says that you should consider them only if you really don't have any other choices for insurance.

"These policies are better than no coverage at all," O'Leary said. "And that's about it."

Say you are switching jobs. You might sign up for a short-term health policy if you know that the gap in your insurance coverage will be especially brief. Some consumers would rather pay the lower premium prices that come with short-term insurance than the higher ones that come with COBRA, which provides far more comprehensive coverage.

Maybe you missed the open-enrollment period to sign up for a traditional health insurance policy, and you don't expect a qualifying life event in the near future that would allow you to sign up before the next open enrollment. A short-term health insurance policy will provide at least some coverage before that enrollment period rolls around again.

If you have no other choice but to take out a short-term health insurance policy, make sure to ask your provider exactly what coverage you are getting for your money. You don't want to be surprised by a big medical bill when you visit your doctor.

Have you ever relied on a short-term health insurance policy?

This article is from Dan Rafter of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread:

Laid Off? What To Do Before Plunging Into The Job Search

Julie Rains — Fri, 25 Apr 2008 00:40:49 +0000

[Editor's note: If you recently lost your job, take a look at Wise Bread's collection of tips and resources for the recently laid off.]

Your company has announced a soon-to-come layoff or you’ve been escorted out of the door. What’s next? What should you do…before updating your résumé, tapping into your professional network, and looking for a job? (Those of you who are considering career changes may also find this guide useful).

Review your financial status, especially now that it is changing.

Calculate how much money you’ll need to meet your obligations and how many months you’ll have before your personal financial situation moves from good to bearable to desperate.

Evaluate your severance package and consider your options, which may involve a lump-sum payment or salary continuation. (See New York Life’s What Do I Need to Know About Severance Packages? and About.com's article on the Severance Package.)

If you are offered consideration (aka extra cash or some other benefit) for signing a non-compete agreement, think about the implications for locating a new job. (For example, I know someone who lost his job following a company downturn but couldn’t leverage his industry expertise because of a non-compete agreement; he didn’t have a college degree and was unable to relocate because of child custody issues, adding to the job-search and financial distress). If you signed a non-compete upon your hire or for consideration after being hired, see if you can get a clear definition of what companies or industries are considered competitors, or if the agreement is enforceable in your state.

Look at your benefits package: your life, health, and disability insurance coverage as well as your retirement plans.

When will your benefits end? Do you need to replace your insurance coverage?

If you are eligible for COBRA (Consolidated Omnibus Budget Reconciliation Act), do you know its monthly cost? (more on COBRA and rights associated with HIPAA). Davis Liu, M.D., author of Stay Healthy, Live Longer, Spend Wisely mentions www.ehealthinsurance.com as a resource for investigating short-term and/or high deductible health insurance. (Disclosure: I received this book in exchange for a book review; more info to follow in a separate post).

Analyze your 401(k) plan options and obligations. Do you have a loan associated with the 401(k) and will you need to pay that off immediately? Should you leave the 401(k) with your employer’s administrator while you decide where to transfer the funds? Do you need to transfer the assets immediately upon your separation from the company? (See 401(k) Help Center)

Learn the rules of unemployment insurance. See if and when you are eligible for benefits (you should be eligible unless you were terminated for cause) and what the requirements are to receive payments. If you have been displaced as a result of increase in imports or offshore business, look into Trade Adjustment Assistance: here are some details about the Trade Act.

Set your professional and personal priorities. Will you live in the same town or will you relocate? Are you looking for a similar job in the same industry? Do you want to take a step forward and advance in responsibility or do you want to move laterally, or take a step back in order to spend more time with your family or developing a business idea?

Investigate a new career (if that’s what you want) and determine the time and resources it might take.

You might decide to become a nurse and you already know, for example, that an RN license may take 2 years to earn. But do you know when you’d actually be able to start classes? Do you know if you’d be accepted immediately into a program or will it take a several months?

Or, you’ve thought you might work as a teacher by getting credentials through an abbreviated training program (less than the traditional 4 years it usually takes to earn an education degree). Do you qualify? (I know someone who found several weeks into his discussions with an administrator that his GPA from his bachelor’s degree—earned over 20 years prior—was too low to enter the program).

Get a handle on the nuances and the time frame for earning credentials and landing a job.

Check salary.com or payscale.com (or do your independent research) to see if your professional goals, personal desires, and financial needs are synchronized with your expected compensation. Decide whether you’ll relocate, sell the house, stay in your industry, or take an interim job while you go back to school.

Why pause before making the job-search plunge? If you take a breath and do some financial assessments, you’ll be more focused and more likely to get what you really want.

Note that many topics I’ve mentioned may be governed by state laws such as the enforceability of non-compete agreements, pre-existing condition exemptions for health insurance, and availability of specialized teacher-training programs so talk to an expert in your area.

This article is from Julie Rains of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread:

Health Insurance Costs Too High? Alternative Not Pretty

Amy B. Scher — Fri, 28 Sep 2007 20:14:52 +0000

I hear this argument over and over and it's one of the things I'll debate until I'm blue in the face. "Health insurance is too expensive." Ok, I have to agree. But, at the age of 25 (I know, I know…people aren't supposed to get sick that young) I was diagnosed with a chronic illness and will stand behind my statement that "being sick is way more expensive than health insurance." No way around it. We are obviously not talking about the kind of sick a nasty cold brings. Fine, if you don't have insurance and have to go to the doctor for your cold, it’ll probably be $70 plus meds. But, if something worse happens, you are basically screwed. An ambulance ride is an easy $500. If they have to use sirens, count on an extra fee. If you need a biopsy of something, you not only have to pay the doctor but the lab and the shipping costs. Happen to need an antibiotic that works for a specific condition? It could cost you $500 for a 30-day supply (I know first-hand).

So, let's rethink this. First of all, I had insurance when I was diagnosed and my healthcare costs are still so outrageous you'd probably choke hearing about them. BUT, if I didn't have insurance at all, I'd for sure be bankrupt by now. Like, 3 times over.

One of the issues is eligibility. Because I have now been deemed "uninsurable," I appreciate my insurance much more than a lot of people. I have to pay a lot for it but I'm so glad that I had it when I got sick because now there would be no way I could qualify. I’m too big of a risk and insurance is a business so that leaves me in the dust. I often get the rebuttal line about having to pay for health insurance each month and then wasting it if you don’t have to use it. I say it’s the best thing you could ever hope to waste. It’s the point of insurance. You are transferring a risk. You don't get car insurance praying you'll get in a car accident so you get your money's worth, right? Same concept.

Now, there are a ton of things about healthcare we can complain about, and rightfully so. I mean, after seeing Michael Moore's SICKO, we can't help but be disgusted. The unlucky ones of us who have lived it weren't shocked at all. For everyone else, it was an important wake-up call. But, even though insurance is far less than perfect, it's still something. For instance, not long ago, I needed a $5,000 brain scan. I ended up having to pay $500 of it. So, some would bitch that I shouldn't have had to pay anything, that's what insurance is for, etc. But, I'd rather pay $500 than $5,000. It's a deal!

There is also the theory roaming about that if you got really sick and were really poor, the government would take care of you. Partially true. You could possibly qualify for medical care under social security if you were deemed totally and permanently disabled (after jumping through a million hoops and most likely having to hire a lawyer in the meantime). However, there is a two-year waiting period if you even get approved (which is not easy). Playing devil’s advocate, let’s say that is your back up plan. Very few ever go as far as to research if this is actually a good idea. Government care (at least in America) is not the same quality of care you'd get through private insurance. Pessimists will say that private insurance isn't exceptional care either, but let me assure you that if you feel that way, you wouldn't be happy on the government's plan at all. You wouldn't have to pay but remember as the old saying goes....you get what you pay for. Also, if you are getting it for free, good luck getting anyone in the system to hear your complaints.

If you have a job that offers insurance, don't leave until you have a new job that offers insurance. If you have a choice of an HMO or PPO, choose the PPO even if it costs more now (this will be an entirely different article). An HMO sounds like a good deal, until you are sick and waiting for the insurance company to decide when you get to see the doctor, who you will see, what tests you need and more. You really don't want someone in the business of saving money making those decisions for you.

After becoming disabled and unable to work, I qualified for COBRA (continuation coverage from my old employer's group through California) at a very high premium. It’s the same insurance as I got at no cost when I was working there which is what COBRA laws protect. But, it's the best money I spend every month. After all, there is nothing I'd rather spend my money on more in this world than getting well, or at the very least, not getting worse.

If you are one of the healthy (and lucky) ones, realize it's an amazing privilege to be insurable. And if something unfortunate happens, your less-than-perfect but still-something insurance company will be there to take care of you better than you could all on your own. I promise.

Note: For more information on COBRA, visit Department of Labor's FAQ.

[Editor's note: For more on Amy's healthcare story, check out Healthcare Hacks.]

This article is from Amy B. Scher of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread: