Is short-term health insurance a good alternative to Obamacare?

We get questions like this all the time.
In fact, we’re having more and more conversations that go something like this:

  • “I just can’t afford these monthly prices anymore – especially for a plan with a really high deductible!”
  • “I’m not sure the Obamacare plans are worth the price we’re paying.”
  • “There’s got to be a better option, right?”

Short-term health insurance plans were originally designed to provide a safety net for people who are in between coverages – for example, someone with a waiting period before getting job-based health insurance benefits.
Their use has expanded, however, and many people now consider them as an alternative to Obamacare. In many cases this makes a lot of sense, but we always want to be sure you know what you’re getting.

Disadvantages of Short-Term Health Insurance

None of these disadvantages are necessarily deal-breakers for a lot of people, but you need to know a few things upfront:

  • Short-term health insurance is not Obamacare-compliant. In other words, you could wind up paying a fine when you do your taxes for not fulfilling the “individual mandate” in Obamacare.
    UPDATE: The individual mandate will not be in force beginning in 2019.
  • Pre-existing conditions are not covered.┬áIn fact, certain pre-existing conditions will make it very difficult to get coverage (there are options where you could get a plan but the price would be higher).
  • Preventive care is not covered.
  • No copays. You typically won’t get copays for doctors and prescription drugs. (On the plan we recommend you will get a $50 copay at an urgent care center.)

Advantages of Short-Term Health Insurance

It’s important to understand those limitations, but there are some very good reasons why enrollment in short-term health insurance plans has been going up.

  • They provide good catastrophic coverage. The main point of insurance, after all, is to protect you from unexpected costs.
  • You can enroll anytime. You don’t have to worry about any Open Enrollment period like you do with Obamacare. In fact, this is why many people have to enroll in short-term health coverage – because it’s the only insurance option available!
  • Short-term health insurance is cheaper than Obamacare. This may or may not be the case for people who are eligible for Obamacare subsidies. But without subsidies, Obamacare plans are far more expensive than short-term alternatives. (Most of the time, this is still true even if you factor in a penalty for not having Obamacare).

This last reason – cost – is obviously the most compelling for most people who choose short-term health insurance plans.
You can get even more out of a short-term health insurance by adding a really helpful little supplemental policy from the same company (so it’s all one payment): the Plan Enhancer. Most of our clients who purchase a short-term health plan add the Plan Enhancer.
Learn more about the Plan Enhancer here.
In the final balance, the answer to our question is usually YES! Short-term health insurance plans are often a very good alternative to Obamacare plans — especially if you’re relatively healthy and not eligible for subsidies.
See for yourself: