What’s the Difference? Short Term Health Insurance vs. ACA Health Plans

Short Term health insurance, what’s also referred to as Temporary health insurance or Term health insurance, provides flexible and fast health coverage for those times when you face a gap in your health insurance coverage. If you’re between jobs, leaving school or your parent’s health insurance plan, or losing your current coverage and weighing your options, Short Term insurance can be a good solution, offering affordable health insurance right when you need it.

However, and this is important: A Short Term health insurance plan is not the same as an Affordable Care Act (ACA) health insurance plan.

Short Term: Not an ACA Plan Replacement

It’s an understatement to say that the Affordable Care Act (ACA), also called Obamacare, changed the health insurance landscape. Consumers are still trying to navigate those changes and to understand what the ACA health plans offer them and what those plans will cost them.

Some companies selling health insurance claim Temporary health insurance is an affordable health insurance replacement to an ACA health plan. You can save hundreds on your health care spending with it, they argue. They even measure premium costs with Short Term health plans against those you would have with an ACA health plan.

The only problem with that: Short Term insurance and ACA health insurance aren’t really the same type of health care coverage at all.

Short Term Health Insurance vs. the Essential Health Benefits

Obamacare understands the difference. The ACA doesn’t consider Short Term health insurance minimum essential coverage, and you may face a tax penalty for choosing Short Term over ACA coverage.

According to the ACA, to meet the minimum essential coverage standard, medical insurance plans (with a few exceptions) must include at least 10 essential health benefits (see sidebar).

Short Term health insurance is more limited. Doctor visits and outpatient care, Emergency services, Hospitalization, and Laboratory services/tests are often covered in some way in Short Term health plans. But that’s where the similarities to ACA health plans end. The other 6 essential health benefits are a different story in most Short Term insurance plans:

Maternity Coverage

Maternity and newborn care—Generally, pregnancy is not covered in Short Term plans, except for complications. Benefits for newborn care are often limited.

Pediatric services

Pediatric services—Not covered unless mandated by your state.

Maternity Coverage

Rehabilitation services—Limited in most Short Term plans.

Additional services

Mental health and substance use disorder services, Prescription drug coverage, and Preventive care—In Short Term, you will find no coverage or limited coverage in these categories, depending on the plan you choose.

That Short Term health insurance doesn’t include all the essential health benefits outlined by the ACA isn’t necessarily a bad thing. Not everyone requires all those benefits, and Temporary health insurance gives those people another option.

Other Short Term Differences You Should Consider

Short Term health insurance has a few other key differences from ACA plans you should weigh before you make a health insurance decision.

Gauranteed Issue

It’s not guaranteed issue. This means that whereas you are guaranteed acceptance into an ACA health plan, with Short Term you have to apply, answer a series of medical questions and be approved before you can be covered.

Preexisting Conditions

Preexisting conditions aren’t covered. If you come into a Short Term medical plan with any preexisting condition, expenses related to that condition will not be covered. They are covered in ACA plans.

Tax Penalty

You may face a tax penalty. Because all the essential health benefits aren’t covered, plans aren’t considered minimum essential coverage, meaning you may face a tax penalty under Obamacare if you choose to go with Short Term.

Term Lengths

Terms are limited. Generally with an ACA plan as long as you keep paying the premium, you keep the plan. With Short Term insurance, once you reach the end of a plan term, you can't renew that plan.

Year Round Coverage

Coverage is available year round. This is one place where Short Term health insurance is more flexible than ACA plans. With ACA plans you have to wait for a yearly open enrollment period or have a qualifying event to apply for coverage. Short Term insurance is available year round. You can apply for it at any time.

So, really the question of Short Term versus ACA comes down to what you really need. Short Term health insurance is limited coverage for a limited period of time. If that fits your situation right now, and if you can deal with the other differences the plans have, then Short Term may be your product of choice.

How Short Term and ACA Health Insurance Plans Really Stack Up

ACA Health Plans

 

Short Term Health Plans

ACA Health Plans

10 essential health benefits

Short Term Health Plans

More limited benefit packages

ACA Health Plans

Preexisting conditions covered

Short Term Health Plans

Preexisting conditions are NOT covered

ACA Health Plans

You may get tax subsidies

Short Term Health Plans

You may face tax penalities

ACA Health Plans

Plan generally continues as long as you pay premium

Short Term Health Plans

When your term ends, you can't renew that plan

ACA Health Plans

Guaranteed issue—you’re automatically accepted for coverage

Short Term Health Plans

Must apply, answer medical questions and be approved for coverage

ACA Health Plans

Change or buy health plans only during open enrollment or with qualifying event

Short Term Health Plans

Apply for plans at any time, no open enrollment or qualifying event needed

ACA Health Plans

Generally higher premiums than Short Term plans

Short Term Health Plans

Generally lower premiums than ACA plans

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