‘Help! I Don’t Know Which Health Plan to Pick’

Healthcare application
Which health insurance will you choose?

On the surface, it’s a simple question — but it’s one that can be fraught with much anxiety.

For those who have health coverage through work, the process can be as simple as reviewing your company’s health plan comparison sheets, calling your benefits hotline, clicking a few buttons — and voilà, you’ve made your elections.

But for all those self-employed people out there — contractors, freelancers and all-around one-man bands — choosing a health plan isn’t quite so easy a process.

It can feel more like you’re working on a senior thesis, with all the fact-finding and research you have to do. But instead of gaining more clarity, you can often end up more confused than when you started.

Metal plans? HMOs? Coinsurance? Oh, my!

To show just how difficult it can be, we asked two self-employed people facing vastly different health care choices — one wants bare-bones solo coverage, the other has to cover a family of four — to share the difficulties they’re encountering in choosing a health plan for 2016.

Then we asked Sarah O’Leary, founder and CEO of ExHale Healthcare Advocates — a Dallas-based company that helps consumers and businesses navigate their health care options — to offer advice on what factors should come into play with their decision-making.

Her guidance could help those of you out there who can’t just run down the hall to pick your resident HR rep’s brain.

Who: Rick Rockwell, 39, health and fitness consultant, Sacramento, California.

My health care scenario: “As someone who works in the fitness industry, staying healthy is important to me. Currently, my main job is to manage a website that reviews health supplements, but I’ve also been a personal trainer, wellness coordinator and health instructor for more than 10 years.

That means I exercise four to five days a week. I don’t drink or smoke. I take vitamins and protein supplements. And I try to eat well. I’ve only been to the doctor once in the last three or four years — I don’t even go for annual checkups.

So it’s frustrating that, because of the Affordable Care Act, I’m forced to buy insurance that I’ll rarely use.

Fortunately, for 2015 I qualified for tax credits on a basic plan I got through my state exchange, which helped push my premium below $100. But I have to shop for a new policy for 2016 because I’m now in a higher income bracket and no longer qualify for the same tax breaks.

I’m dreading picking a new plan — I think the process is a pain, and I don’t want to shell out a lot every month for something I won’t use.

So my goal is to pay as little as possible. The bare minimum coverage is all I really need — just something to have in case of an emergency.”

What the health care pro says: For starters, O’Leary says Rick should consider recalibrating how he thinks about health insurance. “[Just as] we’re required to carry auto insurance, we’re now required to carry health insurance — or risk the penalties if we choose not to,” she says.

Plus, there are risks to his chosen profession. “As a personal trainer, he could have a weight fall on him and be in a situation where he needs his insurance,” she adds.

Unfortunately, Rick doesn’t qualify for the most bare-bones catastrophic health plans designed to provide coverage only in the event of a serious accident or illness.

So Rick’s most-affordable option would likely be a bronze health plan, which tends to have low premiums but pays for only 60 percent of medical costs.

“You only qualify for a catastrophic plan if you’re under 30 or you are over 30 and can certify that you can’t afford coverage or are experiencing financial hardship,” O’Leary explains.

So Rick’s most-affordable option would likely be a bronze health plan, a category of ACA coverage that tends to have low premiums but pays for only 60 percent of medical costs, on average.

Premiums can vary greatly by region or state, but O’Leary says Rick could find comparable bronze plans on the California health exchange and on the open market — adding that there could be one administrative advantage to shopping off the exchange.

“When people are sure they aren’t going to receive subsidies, they’ll sometimes choose to go on the open market because you don’t have to fill out the same [type of] application that’s necessary for HealthCare.gov or the state exchanges — it’s just a little bit easier,” she explains. “But you have to make sure it’s a legit, quality plan that meets minimum ACA requirements or risk getting penalized through your taxes.”

If Rick doesn’t travel much outside of his immediate area, he could save further by choosing an HMO bronze plan, O’Leary suggests. HMOs typically offer low premiums because they cover only in-network doctors, but they often have restricted service areas.

If he goes the HMO route, Rick could potentially reap some tax benefits by opening a health savings account. That’s a type of account to which he can contribute pre-tax dollars to cover medical costs — as long as he has a high-deductible health plan.

O’Leary suggests one other avenue Rick could explore: “If he belongs to a professional association or union, [he should find out] if they offer a health plan, which might be another way for him to save money [on his health care costs].”

Who: Yoon Kang-O’Higgins, 40, museum educator, Seattle.

My health care scenario: “In January, my health benefits changed because I decided to scale back at work, going from being a full-time employee to a part-time contractor.

Because the art-education consultancy where I work is based in New York and I’m a remote employee in Seattle, I wasn’t eligible for the same insurance options as the other staff [when I was full-time]. So my employer and I picked a plan through a Seattle-based provider, which they paid for.

That plan covered my entire family, which includes my husband, Mark, 45, and our two sons, Oisin, 11, and Ronan, 10. Mark is an artist and art instructor at two colleges, but he’s a freelancer, so he doesn’t receive health benefits through work.

When I switched to contractor status, my employer stopped paying for my insurance, so I took over the monthly premiums, which run $1,042 per month for a silver plan, with a $2,500 family deductible.

Now that it’s open-enrollment season, I’ve started research on the health exchange, but it’s hard to comparison shop because I heard my current plan will be changing — although I don’t know how yet.

Another option has also emerged: The private foundation where I work a few days a week has offered me access to their health plan, but I’d still need to pay a portion of the premium because I’m part-time.

The foundation’s insurance provider estimated I’d have to pay about $1,000 a month, but with a high deductible — something like $10,000. I’m not sure it’s worth it.

Other than an annual X-ray Ronan gets to monitor an elbow condition, which costs us a few hundred dollars out of pocket, no one in my family has a chronic health need. So I feel like choosing a plan for us shouldn’t be so difficult.

It would make our lives easier to stick with what we have, but if it doesn’t make sense economically, we’ll switch. I’m just feeling decision paralysis because of all the details I have to sift through.”

What the health care pro says: O’Leary cautions Yoon not to fall into the common trap of making decisions based solely on premiums — potentially saving $100 a month isn’t enough reason to make a switch.

Rather, she suggests that Yoon put in the elbow grease to create a spreadsheet so she can compare factors like premiums, deductibles, co-pays, coinsurance, prescription drug costs, total out-of-pocket costs and out-of-network coverage for any plan she’s considering.

People are feeling the pinch of costs, so they don’t want to spend a lot on premiums. But we encourage them not to let that cloud their judgment.

“People are feeling the pinch [of costs], so they don’t want to spend a lot on premiums,” O’Leary says. “But we encourage them not to let that cloud their judgment. [Many factors] fit into the equation of what makes a quality plan for you.”

Even if Yoon sticks with her current plan, changes are afoot — so it’s important that she confirm that her family’s preferred doctors will continue to be covered.

“Don’t just take the website’s word for it. Call up your doctors and make sure they’re in-network,” O’Leary suggests. “And when you get your insurance card in January, double-check and triple-check that info, because you have a small window to appeal if you feel they’ve changed the network since you signed up.”

Ultimately, O’Leary says that if Yoon has been happy with her coverage, her plan remains affordable, and she doesn’t anticipate big surgeries or procedures, she shouldn’t feel pressured to switch.

O’Leary does, however, offer up a strategy that could potentially help lower the cost of Ronan’s annual elbow X-ray.

If Yoon’s plan doesn’t cover it at 100 percent, she can shop around to see how much that same X-ray would cost at different imaging centers, or use a site likeHealthcare Bluebook to do a price search in her area. She can then use that information to negotiate the price up front at a chosen facility.

“[People don’t realize] the amount of negotiation that can be done for non-emergency tests and procedures,” O’Leary says. “The money you could save by being a smart shopper can be significant.”

Where to Get This Year’s Flu Shot for Less

U.S. CVS Caremark Flu ShotsWith flu season about to rear its ugly head, now is the time to line up for your annual flu shot. Peak time for flu in the United States generally falls in January or February, but activity can erupt as early as October and it takes two weeks after vaccination for the body to develop the necessary antibodies. The Centers for Disease Control and Prevention recommends that everyone over the age of 6 months get a dose of the vaccine. This can be costly for an entire family, especially without health insurance coverage.

To find the cheapest source for flu shots, Cheapism checked prices at six of thelargest pharmacy chains (based in 2014 revenue from prescriptions); warehouse clubs Costco and Sam’s Club, which are known for low prices and allow non-members to use their pharmacies; and a doctor’s office in Columbus, Ohio. As of the third week of September, all the chains had a supply of the vaccine in stock, as did the doctor’s office. Some employers organize a flu-shot day for employees and spouses, with the cost dependent on your insurance and employer.

Price Breakdown. For self-pay, Costco is cheapest: $14.99 for members and non-members alike, compared with $20 at Sam’s Club. Target and Walmart price the injection about the same, at $24.99 and $25, respectively. Kroger is charging $30 this year, while Rite Aid, CVS and Walgreens cluster on the high end, at $31.99. Prices at doctors’ offices vary widely. Last year a local physician quoted $82.70 for the flu vaccine. This year the going rate is $30.

Provider Price
Costco $14.99
Sam’s Club $20
Target $24.99
Walmart $25
Kroger $30
Doctor’s Office $30
CVS $31.99
Rite Aid $31.99
Walgreens $31.99

Insurance Coverage for Flu Shots. Many insurance companies consider the influenza vaccine a preventive measure and cover some or part of the cost. Every pharmacy and the doctor’s office we contacted can run insurance information through their systems and quickly let patients know whether all, part, or none of the cost is covered. (Other doctors may not provide this convenience. The safest bet is to check with your insurance company before heading to an appointment.)

In-Store Rewards. To entice consumers to the pharmacy for a flu shot, many retailers offer in-store perks to soften the sting. At CVS, customers receive a 20 percent-off shopping pass up to $100, good for any non-sale and non-pharmacy item. The Pharmacy Rewards program at Target offers 5 percent savings on a full day of shopping with every five prescriptions filled, and a flu shot counts toward that. Each flu shot at Walgreens translates into a donated vaccine for a child in need.

Appointments/Walk-Ins. Every place we called, aside from the doctor’s office, adheres to the same policy: no appointment necessary. Just walk in and wait your turn. Most pharmacies estimate a 10- to 15-minute wait, more or less, depending on traffic. If you go on a weekend, patience may be in order. Check your doctor’s office for procedures — some require appointments and others have designated walk-in times.

Feds: Switch Plans, Save on Health Insurance

The HealthCare.gov website, where people can buy health insurance, is displayed on a laptop screen in Washington, Tuesday, Oct. 6,  2015. Premiums are expected to rise in many parts of the country as a new sign-up season under President Barack Obama�s health care law starts Nov. 1. But consumers have options if they�re willing to shop, and an upgraded government website will help them compare. (AP Photo/Andrew Harnik)

CHICAGO — “It pays to shop” is the message from the government, two days before the start of the third sign-up season under President Barack Obama’s health care overhaul.

The Department of Health and Human Services released data Friday on next year’s prices in the insurance markets established by the law. Returning customers to HealthCare.gov can save, on average, $51 a month if they switch to the lowest-cost plan within their coverage level, according to the report. Most can find a plan for $100 a month or less, after financial help from a tax credit.

To hear the administration tell it, there are deals galore. But experts say the monthly premium is only part of the story. They say consumers should examine the quality and coverage of health plans, as well as their prices.

The price message appeals to young uninsured Americans and will be stressed in advertising and enrollment drives this season as the administration tries to find, woo and keep 10 million paying customers by this time next year, a modest target announced earlier.

Beyond the sticker price, consumers should keep an eye on what they will get for their premium dollars, experts said. Shoppers should consider how many hospitals and doctors are covered, for example, and which prescription drugs are included.

“What the message should be is ‘be a smart shopper,’ ” said Caroline Pearson of Avalere Health, a private market analysis firm. “All we really see in this report is price, price, price. That’s what the government thinks will draw [consumers] to the market, but it may also be what disappoints them when they get sick.”
People do switch plans. In 2015, nearly a third of returning customers changed to a new plan on the marketplace. That’s a far higher rate of plan-switching than among people who get their coverage through a job, said HHS Assistant Secretary for Planning and Evaluation Richard Frank.

Some consumers are being forced into new plans because of plan cancellations and the collapse of some health insurance cooperatives. The data released Friday show a choice of 50 plans a county overall, compared to 58 a county last year, and an average decline of two plans per insurer.

“That’s not a change that concerns us,” Frank said, calling it a sign of a “maturing market” as insurers drop unpopular plans.

It will take more time to fully analyze how insurers have restructured health plans for 2016. In some markets, there are fewer “preferred provider organization” plans. Those PPO plans give consumers the most flexibility about which doctors they can see. Some counties have no PPO plans on the market for 2016, leaving customers with a choice of HMOs and other more limited types of policies.

“It means that generally the networks are smaller. … You can’t go to providers outside the network just because you want to without paying the full cost,” said Gary Claxton of the nonpartisan Kaiser Family Foundation.

The government plans to add tools to HealthCare.gov to make it easier for people to check if their doctor or a drug is covered in a plan. But those tools aren’t ready and are still being tested for accuracy.

The bottom line, said Claxton, is “do your own research.”

Married Same Sex Couples Now Have Health Coverage Parity

Men doing financesSame sex couples who are married can purchase a family health insurance plan without being concerned about any restrictions.

The landmark Supreme Court case that legalized same sex marriage in June, Obergefell v. Hodges, paved the way for consistent insurance options for married same sex couples.

“This provided same sex couples with the same access to family health insurance as heterosexual couples and uniform access from one state to another,” said Nate Purpura, vice president of consumer affairs at eHealth.com, an online health insurance exchange based in Mountain View, California.

The Supreme Court ruling protects against discrimination and insurance companies must offer the same coverage for both same sex and opposite sex spouses, according to Healthcare.gov.

“This is true regardless of the state where: the couple lives, the insurance company is located and the plan is sold, issued, renewed or in effect,” the website says.

Married same sex couples can also qualify for subsidies, which lower the amount of their monthly premiums, making them more affordable and accessible.

“Like other married couples, married same-sex couples who file taxes jointly may be eligible for government subsidies, if they meet the income requirements of the Affordable Care Act,” Purpura said.

Moving to another state is no longer an issue with the Supreme Court ruling and couples can buy comparable coverage in another state.

Is Family Coverage the Right Option?

In many cases, seeking family coverage saves people money on not only monthly premiums, but also deductibles. With most plans, you typically “share a family deductible equivalent to two individual deductibles,” said Purpura. “If you have children and hence have three or more persons on your plan, you can potentially save a significant amount of money in terms of your annual deductible.”

It may make more sense to cover your dependent spouse on an individual plan of his or her own.

Depending on the coverage offered at your company, family coverage may not prove to be the best financial decision as individuals determine what plan to purchase since open enrollment began on November 1. Some employers will pay a larger share of your health insurance premium but offer little for your dependents. In these instances and similar to many heterosexual couples, you might determine that it is better to have separate individual plans financially, he said.

“It may make more sense to cover your dependent spouse on an individual plan of his or her own,” Purpura said.

Only couples who file their taxes together can qualify for subsidies. The government subsidies help lower the cost you pay each month for health insurance and married families with household income of 400% of the federal poverty level or less may qualify for them. In order to qualify, the federal tax return must be filed as “married filing jointly.

Companies don’t need to ask employees for documentation of a domestic partnereither in civil unions or registered domestic partnerships in order to be eligible, said The Human Rights Campaign Foundation, the Washington, D.C.-based lesbian, gay, bisexual and transgender civil rights organization.

“The Human Rights Campaign Foundation encourages employers to treat all beneficiaries equally when requesting documentation to determine eligibility,” said the civil rights organization. “In other words, documentation should not be required of partners if it is not required of spouses.”

Domestic partner coverage for couples who aren’t married might be facing the possibility that it might be phased out in the future. Some state and federal entities are reconsidering the domestic partner laws or policies which existed before the Supreme Court ruling that gave same-sex couples access to coverage.

“To learn more about your options, contact your state’s department of insurance,” Purpura said. “If you’re in a legal same-sex domestic partnership, you may need to get married in order to keep your family covered under a family health insurance plan.”

What the Previous Health Insurance Market Was Like

Before the ruling in June, same sex couples faced a myriad of inconsistent policies when they were choosing health insurance options. Moving to another state often meant even more confusion and headaches, depending on whether same sex marriage was legal.

“There was a patchwork of laws and regulations that often varied significantly from one state to the next,” Purpura said.

When couples lived in states that already deemed same sex marriage as legal, married couples could purchase family health insurance plans like heterosexual couples. In a state where legal same sex domestic partnerships were recognized, but not marriages, often family health insurance plans were also made available.

Residing in a state without any recognition for same sex domestic partnership or marriage, finding a family health insurance plan was nearly impossible unless the insurer or sponsoring employer chose to offer the coverage, he said.

Moving meant many couples lost their coverage for health insurance, leaving them vulnerable and at risk of having no coverage, putting them at greater risk financially.

7 Ways to Save on Health Insurance

Doctor and patient in officeHealth insurance costs are creeping ever higher. The Kaiser Family Foundation reports that average premiums will rise 5.1 percent in 2016 for the lowest-cost marketplace silver plans available to a 40-year-old nonsmoker earning $30,000 a year in 14 major cities. The increase will be lower for people with tax credits, but could still represent a significant jump in the monthly bill.

While there aren’t as many clear discounts for health insurance as there are forauto and renters insurance, there are ways to save. Here are seven tactics that can lower health insurance costs.

Increase the deductible. Health insurance premiums correspond to the plan’s deductible; that is, the total amount you must pay for care before insurance kicks in. Increasing the deductible can be risky — in a serious emergency the amount due can climb quickly, leaving you on the hook for hefty out-of-pocket expenses. Still, this might be a reasonable choice if you’re not concerned about the cost of routine care (which counts towards the deductible) and have funds set aside to cover a major illness or emergencies.

Choose an insurer with phone-in consultation. For someone who is generally healthy, a plan with a high deductible and a phone-in service might be a good option, says Eric O’Brien, president of Mosaic Employee Benefits, a multistate independent broker. Teladoc, for example, lets plan participants call or video chat with a doctor at any time for diagnoses of minor ailments and prescriptions. In some instances this is cheaper than visiting a doctor or emergency room. Consultation costs vary by telehealth provider but typically settle around $35. The fee may be lower for people with a monthly or annual subscription.

Pick a narrow-network plan. Save on premiums by choosing an insurance provider that maintains a skinny, or narrow, network in the region. In other words, the insurer may be a large, even national, company but includes only one or two medical centers in its local network. Premiums may be lower than plans with more in-network hospitals and physicians. If you want to stick with your primary care physician, first check to make sure he or she is in the narrow network before opting in.

Adjust income to be eligible for tax credits. People who buy health insurance through the government marketplaces may be eligible for tax credits depending on their “modified adjusted gross income” and family size. The lower the income, the more credits are available. You can decrease adjusted income byincreasing tax deductions. One of the easiest ways to do this is by contributing to a retirement plan — either a 401(k) or 403(b) plan through an employer or a traditional Individual Retirement Arrangement on your own.

Quit smoking. Using tobacco (cigarettes, cigars, snuff — or just plain chewing it) for anyone who buys health insurance. Marketplace plans may charge tobacco users up to 50 percent more than nonusers. Quitting comes with other financial benefits, as well. In addition to not paying for the tobacco products, premiums for life, renters, and homeowners insurance may be lower for nonsmokers.

Look beyond the exchanges. Instead of limiting your search to HealthCare.gov or state-run marketplaces, try direct shopping with insurers or compare options on a private exchange, such as eHealthInsurance or GoHealth. Prices may not be lower for identical plans, but you might find a plan that isn’t listed on the government exchange and fits your budget better. An added benefit is follow-up convenience: If there are any administrative or billing problems, they can be resolved directly with the insurer rather than having to work through the marketplace.

Consider a nonprofit health care co-op. An alternative to mainstream health insurance plans is one of the health cooperatives created when the Affordable Care Act passed. Health co-ops are nonprofit insurance organizations governed and owned by their members. A 2013 report by consultants McKinsey & Company found that in 22 states with a health care co-op, the co-ops offered the cheapest insurance plans. Some co-ops are struggling to stay open given lower than expected enrollment rates, but in some places they are a money-saving alternative.

Why Learning Obamacare’s ‘Metal’ Plans Is Important

Three jigsaw pieces bronze silver and gold as a podium concept of winningHealth insurance companies are increasingly adding the metal plans to the names of the plans, which can add to the confusion of which option to choose.

Since 2014, all the health insurance plans being offered are now designated by a metal level — platinum, gold, silver or bronze. The names of the metal levels are intended to be a shortcut on how much a consumer will pay for their coverage. Figuring out what they mean is crucial to all consumers, not just ones who are receiving subsidies.

Metal levels provide a guide to the amount of cost sharing consumers will be paying for all plans. Cost sharing is the amount you pay for deductibles, co-pays or co-insurance, said Nate Purpura, vice president of consumer affairs at eHealth.com, an online health insurance exchange based in Mountain View, California.

Choosing a higher metal such as gold or platinum means the out of pocket costs at a doctor’s or hospital visit will be less. The silver and bronze plans, which are the lowest metal plans, “tend to have higher cost sharing” and consumers will have to spend more money on deductibles and co-pays, he said.
The amount of the premiums you pay each month increase as you go up the metal level ladder, but the amount of the cost sharing declines.

The metal plans were created to differentiate between the amount of cost sharing or actuarial value for each option — bronze plans cover the least amount at 60 percent of a person’s medical costs while silver plans covers 70 percent. As the names imply, the more precious the metal, the more coverage it provides — with gold plans covering 80 percent and platinum covering 90 percent of the costs.

“The actuarial value breaks out what percent of costs are paid by the insurer or by the consumer so silver plans have an actuarial value of 70 percent,” said Theresa Stenger, an account manager for Trion Group, a King of Prussia, Pennsylvania-based employee benefits marketplace company. “For every dollar spent on health care expenses, the insurer pays 70 cents and the member would pay the 30-cent difference through their deductibles, co-pays and co-insurance.”

Factors to Examine …

All the metal plans have their pros and cons, and examining them in a simple fashion can help the consumer determine which one works best for him.

Gen-Xers and millennials who have no health issues and rarely go to the doctor might opt for a bronze plan, said Purpura. Make sure you can pay the deductible in case of an accident and maximum out of pocket amounts.

Consumers who take prescription drugs on a regular basis or have other ailments like diabetes should consider buying a silver, gold or platinum level plan. Although you pay more in your premium each month, that money could be “more than made up for in the money you’ll save when you get medical care over the course of the year,” he said.

Other factors are equally important such as your doctor, hospital network and prescription drugs, so don’t overlook them.

Consumers should calculate how much they can afford to pay not only the monthly premium, but also the deductible over the course of a year.

“The bronze plan will be less expensive from a premium perspective, but could the consumer afford to pay $6,600 out of pocket in one year should a medical issue arise?” Stenger said. “A consumer needs to consider what they can afford to pay in premium for better, more comprehensive coverage versus what they can afford to pay in premiums alone.”

A bronze plan sold by one insurer is not the same as a bronze plan sold by its competitor, so check out the details such as the cost of a prescription drug. If you rarely take medications, then a plan where you pay a slightly higher amount, such as $40, might make more sense than one where you pay nothing but has a more expensive premium or higher deductible.

“You could have a bronze plan that pays for all prescriptions and nothing else,” said Jack Hooper, CEO of Take Command Health, an online health insurance exchange based in Dallas. “Another company might make another bronze plan that covers no prescriptions, but pays for mental health or emergency care or whatever to reach the 60 percent level. You win when you can correctly discern which plan is skewed to cover your needs the best.”

Receiving Subsidies …

The subsidies make all plans more affordable, so consumers who receive them tend to buy plans which are higher up the metal level ladder, Purpura said. People who receive subsidies are “most likely” to enroll in a silver plan while consumers not receiving them lean toward bronze plans.

“The dollar value of your subsidies is tied to the so-called ‘benchmark’ plan in your area, which is always a silver plan,” he said. “That means that the value of your subsidies relative to your premiums begins to diminish if you climb too far up the metal ladder.”

The Only Time Short-Term Health Insurance Makes Sense

the cost of healthcareThere’s only one time you should buy short-term health insurance — when you have no other option.

“We call them Swiss-cheese policies,” says Sarah O’Leary, founder and chief executive of national health care consumer advocacy group Exhale Healthcare Advocates. “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 health care 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 temporary insurance granted by the Consolidated Omnibus Budget Reconciliation Act — 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 visit, 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.