The main reasons are:
- You will still pay the tax penalty!
- You can have a claim denied due to pre-existing conditions
- Better and less expensive options may be available to you
- You can typically cancel the better, “long term” plans any given month
You Will Still Pay The Tax Penalty!
The Affordable Care Act (ACA) and therefore the IRS, treats short term insurance about the same way it treats a parakeet. You cannot avoid paying the tax penalty for not having health insurance by telling the government that you have a parakeet.
Why? The Affordable Care Act doesn’t consider a these plans to be health insurance.
Why? Neither short-term plans nor parakeets provide Minimum Essential Coverage (MEC). To be ACA complaint, an insurer cannot limit what they pay for hospital stays or doctors’ visits. You will find these limits in short term insurance. Health plans that are ACA complaint cannot deny claims based on preexisting conditions and must also meet other standards that short-term plans do not.
You Can Have A Claim Denied Due To A Pre-Existing Condition
In my opinion this is even worse than getting denied for a health insurance policy. When you apply for a short-term policy it is generally issued right away. Your insurer won’t take the time and expense of checking your medical records. So shortly thereafter you will get your policy and think everything is copacetic. If you file a substantial claim they can and probably will, dig through your medical records and try to deny your claim, shattering the false sense of security the policy gave you a just short while ago.
Better less expensive options are often available!
ACA-compliant health insurance is probably your best option if you are not eligible for Medicare, Medicaid or coverage from work.
If you qualify for a subsidy, and almost half of all Americans do, you may find that your premium for a much more robust policy that meets the minimum standards is lower then the cost for a short-term health insurance policy.
You can cancel most “long term” plans any given month
Most so called long term plans can be cancelled any given month. You can usually cancel a policy by faxing or mailing in a form. Some let you do it by phone. Ask your carrier for their rules and if they require that you cancel a certain number of days before your requested termination date.
Unfortunately you can only apply for a compliant plan during the open enrollment period unless you qualify for a Special Enrollment Period. If you cannot buy a compliant plan now, make sure that you consider doing so during the next open enrollment period.
When is the Open Enrollment?
The Open Enrollment period for 2016 started November 1, 2015 and will end January 31, 2016. The Open Enrollment Period for 2017 and future years is scheduled to be October 15th to December 7th.
Buying Outside the Open Enrollment
If you experience a life event that causes you to gain or lose eligibility for health insurance, you may qualify to enroll after the open enrollment period. Examples include: losing employer-sponsored coverage, losing Medicaid, turning 26 moving to another state, getting married or divorced.
Other Plans to Consider:
As an insurance agent with over 30 years of experience I think it is unconscionable for an agent to offer a consumer a short-term plan when they qualify for an ACA compliant plan. An ACA complaint health insurance policy cannot deny you coverage due to a pre-existing condition, can help you avoid the tax penalty and has no upper limit on the major benefits.