The United States Congress passed the Consolidated Omnibus Budget Reconciliation Act (COBRA) in 1985 to help employees continue their health insurance coverage until they find another job with suitable coverage.
So if you lose a job that provided health insurance benefits, you'll likely receive a COBRA enrollment notice that includes information and pricing to continue health insurance. You’ll then have 60 days to choose whether or not you want to continue your coverage through COBRA.
However, as most terminated employees can attest: COBRA is expensive. But why the high cost?
In most cases, your employer covers a portion of your health insurance premium each month, leaving you to cover the remaining amount. But with COBRA, your former employer will no longer cover their portion of the cost of the plan, while adding a 2% admin fee each month.
As a result, COBRA's cost is often more than double the cost of what you paid for health insurance while employed - especially with the additional admin free. And many people are left with the misconception that there aren’t other options beyond COBRA, which is certainly not the case.When individuals lose their job-based health insurance, COBRA (Consolidated Omnibus Budget Reconciliation Act) allows them to continue their coverage for a limited time by paying the full premium.
An ACA or “Obamacare” plan is one option that offers major medical coverage, but you may find that plan costs are still too expensive. Also, you can only enroll in an ACA plan within a certain window of time, usually during open enrollment periods or 60 days after losing your insurance at your previous job.
If you miss the ACA enrollment window, that’s when short term health insurance - or temporary health insurance - comes into play. For many, it's a viable option that provides many major medical benefits with flexible coverage options at affordable rates.
Choosing a short term health insurance plan makes sense if you don't have a chronic health condition and know that your loss of employment is only temporary. But overall, affordability is typically the top reason to choose a short-term health insurance plan.
But health insurance is not a one-size-fits-all deal so shopping around for the right coverage - and being an educated consumer while doing so - is important.
If your income is low, you may qualify for Medicaid, a government program that provides health coverage to eligible individuals and families. Eligibility and benefits vary by state.
Short-term health insurance plans offer temporary coverage for a limited period, typically up to 12 months. They can be more affordable than COBRA but may have limited benefits.
Short term health insurance plans offer several popular aspects, starting with quick, simple enrollment any time of year, with coverage beginning as early as the day after enrollment. Other benefits include:
While the cost savings are different for everyone, short term health insurance rates tend to be considerably more affordable.
For starters, most short term health insurance plans don't cover pre-existing conditions, keeping your coverage costs low. But this also means that short-term health insurance plans may not be the best option if you have a chronic condition that requires regular visits to the doctor.
Additionally, short-term health insurance plans aren’t required to cover 10 essential health benefits like ACA plans do. As examples:
The ACA legislation originally required taxpayers to obtain a Qualified Health Plan or face a penalty, but the penalty was changed to zero starting in 2019 (some states like California, Massachusetts, and New Jersey have mandate laws) and it is still zero in 2023.
Before this change, the minimum penalties for not choosing such a plan were $695 for adults and $347.50 for children, with the total tax penalty of up to $2,085 for a family per year. However, with the Tax Cuts and Jobs Act of 2017, the penalty aspect of the Individual Mandate was changed.
Remember to carefully compare the benefits, coverage limits, and costs of each alternative to find the best fit for your specific healthcare needs and budget.
It's no secret that health insurance policies can be confusing, and there are far more options today than there were a decade ago. As with any product or service, it's best to shop around to know what's best for your specific situation.
You can quickly learn which health insurance plans are available in your area and the details around each by contacting a licensed agent.
Above all: Know that choosing the best health plan for you and your family is not an impossible task. A licensed insurance professional can look up your favorite doctors and facilities to ensure that they accept the plan that you choose. He or she can also check what you'd pay out of pocket for things like medications, copays, coinsurance, and deductibles.
Short Term Medical Insurance
Limited Fixed Indemnity Plans