Why am I considering short-term health insurance for 2019?

Health insurance is a big headache for early retirees in US.  It’s one of the reasons many people choose not to retire until the age of 65.

2019 is not far away, and the health insurance enrollment is to start very soon.

For 2019, I’m considering the short-term health insurance.  The rate for 12-month coverage became available starting October 1, 2018.

The ObamaCare rate for 2019 won’t be available until usually one week ahead of Nov 1, when the enrollment starts.  It’s said that, on average the ObamaCare rate for 2019 goes up by 3%, which is not too bad.  I’ll make the final decision by the end of October.

Today, I’d like to share my thoughts why I’m considering the short-term health insurance for 2019.

Just to clarify, I support ObamaCare.  It’s a great start, and has helped many people like me to retire early, and get covered.  I’m very grateful for that.  Is it perfect?  No.  No policy is perfect at the beginning, not mentioning this huge policy.  The right approach for the government is to tweak it, and make it better, instead of sabotage it.  That’s the ugly politics.

For comparison purpose, I’m using the XXX plan (12 Months Short Term plan, with annual deductible of $5000) as an example.  XXX is an insurance company, and I won’t disclose its name here.  If you want to know the real name of the company, go to the Contact tab, and send me a message.  I’ll let you know in email.  It’s abbreviated as XXX-Short Term in the following table.  My current ObamaCare is Bronze plan.  It’s abbreviated as ObamaCare-Bronze.

Disclosure:  the information is what I collected for my case, at my best knowledge. The listed XXX plan is the one I’m interested in (they have other plans with different deductible, out of pocket, coinsurance and cap).  The information may not be very accurate, and may not be applicable to your situation.  Treat it as a reference only.  I suggest you do your own research, and figure out what is the best for you.

A quick comparison:

XXX-Short Term ObamaCare-Bronze
Monthly premium $230 $442 – for 2018
Coverage period 12 months 12 months
Plan type PPO (with bigger network) HMO (with very limited network)
Annual Deducible $5,000 $7,350
Out of pocket Limit none after meeting the deductible none after meeting the deductible
Coinsurance 0% 0%
Cover out-of-network? Yes.  But it’s much more expensive for non-emergency Only for real emergency
Cover existing condition? No Yes
Cap for annual expense? Yes, $2 million No cap
Free preventive care? No Yes
Prescription drugs Coverage Only covers $3,000 annually No limit
Cover mental health? No Yes
Cover pregnancy? No Yes
Overall coverage Not good Good
Application fee $20 none

More details:

  • No penalty anymore:

Starting Jan 1, 2019, the ObamaCare penalty will be gone.  It means that, you don’t have to buy any health insurance, and are not required to pay any penalty.  You can choose to have no coverage, or buy any type of insurance you like, including short-term insurance.

  • Short-term insurance coverage period has been changed:

Short-term insurance used to cover 3 months only.  After 3 months, you have to apply again, and go through the underwriting and approval again.  Now the insurance companies offer the coverage for 3 months, 6 months and 12 months.  3-month policy is cheaper, and 12-month policy is more expensive.

I’m considering the 12-month coverage.  Why?  Though it’s more expensive, I don’t want to go through the application and approval process during the year, as there is chance of being denied.  For the 12-month policy, once approved, I don’t need to worry about it the whole year (I hope).  Higher premium, less worries, I feel it’s okay with me.

  • Pre-existing condition and annual cap:

If you have pre-existing conditions, the short-term insurance might not work for you.  Luckily I’m healthy, and have no pre-existing conditions, and it might not be too bad.

Also watch the annual cap.  Short-term insurance has the cap, that’s the maximum amount insurance company will cover you during the policy term.

  • What I like about the short-term insurance:

It’s mainly about the lower premium.  It’s at least $200 lower (monthly) than my current ObamaCare Bronze plan.  That will save me $2,400 a year.  I could use that money to travel.

Only a minor thing: the short-term plan (I’m interested in) is PPO.  It means a bigger network.  While my ObamaCare plan is HMO, with a much smaller network.

Another minor thing: the short-term plan (I’m interested in) has lower deductible, $2350 lower than my ObamaCare plan.

The two minor items are not very important to me, as I’m very healthy.

  • What I don’t like about the short-term insurance:

A lot.

The first and the most is the exclusion of pre-existing conditions.  The 2nd is the cap.  The 3rd is the long list of exclusions, which not many people will read and understand.  When you really need medical care, there might be surprises about the coverage.

Life will be more complicated with the short-term insurance, when really needed.  Be prepared for more of the claim hassles and denials.

  • My backup plan:

As long as I’m healthy, the short-term insurance should be okay for 2019.  In case my health status changes, my backup plan is to switch back to ObamaCare during the annual enrollment period.

Since the short-term insurance (I’ll choose) has 12-month coverage, hopefully I won’t be kicked out by the insurance company during the 12-month period, even if I’m seriously sick.  On Nov 1, I’ll be able to enroll back to ObamaCare for the following year.  That will not leave me any coverage gap, I hope.

Summary:

Overall, the short-term health insurance is cheaper, covers less, and is more for healthy people.

I’ll let you know in early November which plan I decide to go for 2019.

Dear readers, what do you think about the short-term health insurance?  Is it better, or worse than the ObamaCare?  None of them is as good as the employer-sponsored insurance, right?

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12 Responses

  1. This is really informative Helen. You have thought it out very well. My wife still works full time, so we are fortunate to have insurance through her employer where I also work part time. We had several years where she worked part time and I was doing independent consulting work so we had to buy insurance. It was pre Obama care. It’s such a complicated and confusing process. I don’t want my wife to work full time if she doesn’t want to, so we may have to get back into this purchasing process in the future. Tom

    • Retire Early Helen says:

      Hi Tom, yeah, this short-term insurance is pretty much the old version of the health insurance before the Obamacare was in place. It’s the muddy water. We never know if we are really covered until we are sick, when it’s too late to know the tricky details of coverage.

      No matter it’s the short term, or Obamacare, none of them is as good as the employer-sponsored health care. This is a dilemma we have to face when the employer-sponsored insurance is not an option. Some people I know keep working to the age of 65, in order to get the MediCare. To me, working to 65 full time is too brutal.

  2. Katrin says:

    Can’t really contribute as I live in a country with a different health care system (fortunately as far as this topic is concerned. Not so fortunate when I compare tax systems ;-)). From following the issue in the media and on FIRE-blogs, and now in your post, I have to say that even with Obamacare it seems quite a challenge to me! But you seem to have thoroughly thought it through, so I’m sure you’ll make the right decision.

    • Retire Early Helen says:

      Hi Katrin, right, the government-sponsored health care is nice, but the money has to come from somewhere. You are right, the Obamacare is not great either, but having something is much better than nothing.

      When I was visiting the US Air Force Museum, I realized the money US government spent on the real wars and cold war was beyond everyone’s imaginations. I don’t see the point of wars, it’s wasting the precious human lives and money. A small of portion of that money should be more than enough to make the health care system better.

  3. Joe says:

    Thanks for sharing. Health insurance is such a big headache for US residents. I don’t know about short-term insurance. The exclusion of pre-existing conditions is a big deal. How does that work exactly? You have to send them a list of pre-existing conditions or something like that? How do they know it’s pre-existing? I’m relatively healthy, but I have a couple of problems too.

    • Retire Early Helen says:

      Hi Joe, applicants have to tell them what medical conditions they have. Examples are like diabetics, cancer, etc. Once the application is submitted, the insurance company goes through the underwriting process. I may get approved, or denied. If approved, I assume they will list the conditions that are excluded from the coverage. It’s like I’m purchasing a car, the car may not have a wheel, or a transmission. The coverage is really a gray area. It’s not that pretty.

      That’s why we need the Obamacare, which covers pre-existing conditions, no cap, and has the 10 essential benefits. Now the two big issues for Obamacare are: affordability (premium, and deductible/out of pocket), and the network.

  4. Caroline says:

    Hi Helen,
    Looks like you are going about it the right way:)
    I am lucky, being in Canada, we don’t have to worry as much about healthcare as you do. But I am already looking at options for prescriptions and dental once I no longer work and it is expensive here too.
    Cheers

    • Retire Early Helen says:

      Hi Caroline, thanks. None of the options are great, but I’ll choose the one that works better for me. Here for the dental and vision, we have to purchase them separately. I hope you get a decent package from your current employer, and find something that you enjoy doing. Take care.

  5. GYM says:

    At first I thought it was a yearly premium and thought $200 or $400 is not that bad, but monthly of $200-$400 really adds up!! Sounds like the short term one is a good option for you since you are healthy. It’s quite the difference in price.

    In Canada, as Caroline mentioned we have MSP coverage and people are charged a monthly fee based on the size of their family. It is $75 for me right now (with my husband and son included) but my employer pays for it.

    • Retire Early Helen says:

      Hi GYM, yeah, the current monthly health care premium of $442 is much higher than my monthly grocery plus utility bills. This is crazy.

      By saving $200 a month, I’ll probably have to deal with more claim hassles with the short-term insurance. I just hope I’m healthy, and stay away from the doctors and hospitals.

      Canada and Europe have much better health-care systems. Those US career politicians should be ashamed of themselves, sitting there for years and doing nothing except bickering and mumbling about those nonsense.

  6. Dragon Guy says:

    Thanks for sharing the numbers between the two plans. The short term plans won’t work for me, but I have been curious as to how they are priced. It is interesting that you can get a PPO in the short term plan; I would have thought they would only be HMOs to be cheaper. Is there a general site where one can search for the plans, or do you have to go to each insurance company and look?

    • Retire Early Helen says:

      Hi DGuy, I got those quotes from the ehealthinsurance.com. It’s like a brokerage site, and lists the quotes for those insurance companies who sell the short term policies. Yeah, it’s interesting the short-term policy I’m interested in is PPO. For example, in central Ohio, it covers the major hospitals. But the ObamaCare I enrolled is HMO, and only covers 2 hospitals, even the Ohio State Univ hospital is not in that HMO network.

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