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Short Term Medical - "Junk" Insurance or a Viable Solution

We were recently directed to an article that ran in Bloomberg Businessweek that focused on a family in Arizona who were left with $244k in medical bills after they purchased a Short Term Medical plan from a 1-800 number they found on the Internet.

The article places all of the blame on President Trump’s Executive Order extending the length of time short term medical plans could cover to 12 months.  It had been 3 months during the Obama administration.  There are a couple of major points that are overlooked:

  1. This family purchased their coverage through a 1-800 number from a company out of Florida (remember they are in Arizona).  They dealt solely with a voice on the telephone.  They bought a plan with a $7,500 deductible and a $750,000 coverage limit for a one-year period, apparently without having full knowledge of the coverage limitations, although that point becomes moot as one reads on.  This is an illustration of why no one should buy something as vital as health insurance coverage (or any insurance coverage for that matter) over the Internet or through a 1-800 number.  One needs to locate (preferably through a referral) a reliable, reputable local agent who can sit down with you and go over your particular needs, then recommend a solid insurance product that serves your needs.  Such an agent would have explained the limitations of a short term plan and would have let this family know of their other options, such as a subsidized ACA plan from the Marketplace.
  2. The issue that arose in this case was not even related to short term medical insurance.  The plan they originally purchased was a short term medical plan but after the one year period expired, the 1-800 number agent who sold them the plan moved them to a different product entirely – an indemnity plan.  These plans are much more limited than short term plans.  They usually cover basic services like doctor visits and hospital stays but at a per event or per diem rate that is substantially less than the actual cost.  For example, $1,000 a day for a hospital stay is a common coverage limit in these plans although the actual cost of a hospital stay can exceed $5,000 a day.  It may cover $1,500 for a surgery, but a heart bypass surgery (the surgery cited in this article) may cost $200,000.  Indemnity plans like this are usually sold only as “gap” coverage for people to cover charges their other insurance doesn’t cover, not as standalone coverage.

Short term medical insurance is not “junk” insurance.  It does have limitations that don’t exist in an ACA-compliant plan, but it offers a very viable solution to someone who is seeking coverage between jobs or who is waiting for the next open enrollment period to be able to obtain an ACA plan.  Many would go completely without coverage if these plans didn’t exist.

Written by,

Donna D. Hill, FLMI
E2E Resources, Inc. Senior Market, Individual and Small Group Specialist
Compliance Director
770.736.9190 (o)