Freelancing is a great way to balance work with a healthy lifestyle. There were 56.7 million freelancers in the U.S. in 2018, of them, 28% of freelance workers were full time. Although there are many advantages to being a freelancer, one drawback is the lack of access to an employer-sponsored health plan. If you are a freelance worker or a self-employed person, there are several health insurance options to consider. A popular health insurance plan for many freelancers is short-term health insurance.
How Does Short Term Health Insurance Work?
Short-term health insurance also referred to as “limited-duration” insurance is a form of coverage meant to insure people for limited periods. It is a temporary and very basic medical insurance policy intended for medical emergency and not every day medical care or prevention. Short-term health insurance plans are not ACA-compliant. In the past, this coverage was used to fill a gap in coverage if you were in-between jobs or needed a health insurance policy only for a short time.
With changes in the law as of 2019, more people may turn to short-term health insurance plans over traditional policies. Predictions for 2019 estimate that enrollment in short-term, limited-duration insurance will increase by 600,000. The type of coverage provided by these plans may also evolve with this increased demand. Shop around to see what your options are before committing to any one policy.
Why Freelancers Choose Short-Term Health Over Other Plans
Below are a few reasons why freelancers opt for short-term healthcare over other options:
If you make too much money to qualify for Medicaid but can’t afford to spend a lot of money on health insurance, short term health insurance is a less expensive health care option and is better than going uninsured.
If you want health insurance, but missed the open enrollment period and have not had a qualifying life event allowing you to purchase out of the open enrollment period.
As an alternative to ACA insurance options. Although freelancers can qualify for health insurance through the marketplace, the cost of the ACA compliant marketplace insurance is more expensive; Before 2019, there were penalties for choosing non-ACA-compliant health plans. As of 2019, there is no federal health insurance penalty when insuring yourself on a short-term health insurance plan.
Some States have State Health Insurance Penalties for non-ACA-compliant health plans. Be sure and check if your State is one of them.
Average Price of a Short-Term Health Plan
Short-term health insurance plans cost 1/3 to 1/5 the price of ACA plans. The price difference depends on whether or not you qualify for a subsidy. The Kaiser Family Foundation (KFF) estimates that the cost of coverage for short term health insurance plans are 20% less than the Bronze coverage offered by the ACA.
For example, in a KFF report, the average cost of health insurance on an ACA marketplace plan (Bronze form) ranged from $264 to $469 per month depending on the State, compared to the cost for a short term health plan starting as low as $25-$141 a month.
Age also plays a role in the premiums for Short-term health plans. For example, eHealth reported that 18-24 year olds paid an average of $63 a month, while 45-54 year olds paid an average of $170.
Short-Term Health Insurance Basics
Unlike ACA marketplace health insurance plans which must cover 10 essential health benefits, short term health insurance plans do not and provide minimal coverage. Short term health plans are not available in all states. Where offered, many do not provide coverage for:
Prescription drugs & Immunizations
Mental health and substance abuse
Pregnancy or Prenatal and maternity care
Short-Term Health Insurance vs. Marketplace Coverage
In addition to reduced coverage, there are other things to consider before you choose a plan:
If you have a pre-existing condition, unlike marketplace coverage, short-term health insurance will not cover you.
You may have to go through a medical exam if your existing plan expires. You may be denied coverage for any medical issues that show up as a result.
These plans may have higher deductibles and out-of-pocket costs for you to pay
If you have a plan that lasts less than a year, each time you extend or change your plan the deductible can reset. This is a disadvantage over an annual marketplace plan.
Short-term plans have annual or lifetime policy limits and caps on coverage
One advantage of the short term health coverage is the price. These savings are only possible if you do not run into unexpected medical situations, or if you are generally healthy and do not use prescriptions regularly. Medical debt is a major problem and cause of bankruptcy, be sure and choose your health coverage carefully.
How to Find the Best Short-Term Health Insurance Policy
Saving money as a freelancer is important, but making sure you understand what you are paying for will help you make the right choice. Aside from comparing coverages offered, here are some tips help you find the best short-term health policy.
Get quotes from several short-term health plan providers so you can compare various options. When possible, speak to a licensed insurance representative or assistant who can offer you some insight into the options you are getting.
Ask if there is an application fee
Find out how extensions work, or if there is any penalty for canceling before the end of a term.
Is there a waiting period before coverage kicks in?
Ask about the lifetime and/or policy maximum, deductibles, copays, coinsurance, and dollar limits.
Ask about the conditions for access to service, do you have to use their network? Where can you get service from?
Check the financial stability rating of the insurance company
How Long Can You Be Insured on a Short-Term Health Insurance Policy?
As of 2019, you may purchase a short-term health insurance plan that lasts up to 12 months. You may also be offered the option to extend the plan for up to 36 months. The criteria vary by state, check locally to understand the details and conditions for your plan.