Temporary alternatives to health insurance

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Temporary alternatives to health insurance

This article was last updated in 2015. For the most up-to-date information on health insurance, visit our Health Insurance Guide.

Like our co-founder Francois, I too, have a kidney stone story.

I had just moved to New York City. I was in training at my new job when I had a sharp pain on my left side. Being the son of a nurse, I did what anyone who thinks they can self-diagnose did--ibuprofen and a lie-down. Then I called her, and she said to go to the hospital.

So 6 hours later, I finally did. After the ER doc told me I didn’t need surgery and gave me my prescription papers, it dawned on me that I forgot to send in my COBRA paperwork. The 63-day enrollment window had passed, and I was 60 days from getting insurance through my new employer.

A health insurance agent without health insurance. Feel free to laugh.

Thanks to healthcare reform, it's now less likely that this will happen to you. But something similar can. For example:

You were laid off, and the severance agreement stated your COBRA would be paid by your employer for three months. Those three months have passed, and now you don’t have enough money coming in to pay the absurd premium on your own. Or, you had an Obamacare or a grandfathered individual plan, but you ran into hard times and stopped paying the premium. Either way, now your coverage is lapsed.

In both scenarios, since non-payment of premiums is not a qualifying event under the Affordable Care Act, you’re not eligible to buy a new plan from your health insurance marketplace until open enrollment resumes in November. Short of buying an expensive plan on the private market, you're out of choices.

Or are you?

There are two options available if you find yourself in a coverage gap: limited benefit plans and short term medical plans. They're not available in every state and neither are viable long-term options, but each can help in different ways during the gap.

Limited Benefit Plans

If, like me, you know what Antenna TV is and religiously watch All in the Family weeknights at 9pm Eastern/6pm Pacific, you’ll have seen a man tell you about getting affordable medical coverage with no exam. What he’s talking about is a limited benefit plan. It’s specifically marketed to seem like insurance while carefully avoiding saying that. It’s not insurance--it’s more like one of those coupon books high schoolers get you to buy instead of having a bake sale (or, to be honest, what your high schooler gets you to sell to your co-workers).

Those coupon books give you discounts, and so do limited benefit plans. Here’s a sample chart based on an actual plan offered:

Example discounts offered by a Limited Benefit Plan

When these are presented to people, they either think "that’s not so bad" or "that’s horrible." Typically, the people who thought the former assumed these were co-pays; the latter realized they’re not co-pays. The dollar amounts actually show how much the plan is going to pay for a particular service. When you have a doctor office visit, you’ll get a $55 discount, just like how that coupon book you bought from your co-worker got you a $5 discount on that $15 car wash. If you your office visit costs $90, the plan pays $55, and you pay $35. Not bad, right?

But if you were treated and released at the emergency room, the plan paying $75 doesn’t do much for that bill. (For comparison’s sake, my kidney stone ER adventure cost $4200 for a 6-hour visit.) Likewise, if you’re hospitalized, $300 for the first day and $250 per day thereafter doesn’t do much when the average cost for a hospital stay in the US in 2013 was $2,157 per day. Granted, limited benefit plans have a network to get you lower rates, but you’re still paying the bulk of the costs after these programs pay their portion.

If you have pre-existing conditions, please be aware that some of these plans will exclude, during the first twelve months:

  • Illnesses or injuries that you sought care for

  • Illnesses or injuries you received prescriptions for

  • Any illness or injury where you previously had signs or symptoms that indicated you might have the condition in question (so if you had chest pains last year, any treatments related to heart problems could be excluded this year)

If you’re in the situation where you don’t have other options, "a little bit of something is better than a whole lot of nothing." But before you go this route, consider buying a short term medical plan.

Short Term Medical Plans

In the past, people who bought these typically were in-between group plans. Many employers had (or have) a 90-day probation before offering benefits, and a short term medical was a simple solution to that gap.

These plans operate like traditional insurance, with deductibles, co-insurance and out-of-pocket maximums for you, and the rest of the charges for the carrier. And like many pre-Obamacare full-coverage health plans, short term medical plans have lifetime maximums.

There are other conditions that make STMs less than ideal:

  • You might only be covered for two doctor visits

  • Many plans will only offer a prescription drug discount card

  • Physical exams and certain gynecological procedures aren't covered

  • You may have to pay a separate fee to join an "association" that gets you discounts on other products in other industries, while also potentially lobbying politicians for causes you might not agree with

  • You might not be offered a renewal if your claims were higher than expected

  • You'll need to pass a medical exam

Before you say to yourself: "I have sciatica, I’ll never get approved for this," my advice is apply anyway. If you’re without coverage, you’re in a bad way. If you have conditions, the underwriter could still say yes. If you’re told "No," then go with the limited benefit plan. Using the $4200 bill I incurred as an example, here’s what your experience could look like under both of these options:

Short Term Medical Plan

Assuming a $500 deductible and 20% co-insurance, I would have paid the deductible plus $740 (20% of $3700), for $1240 total.

Limited Benefit Plan

Following the rates in the table above, and assuming I got a 20% network discount, the total bill would be $3360, of which I’d be responsible for paying $3285 because the plan only pays $75 toward emergency services. But...that’s still less than the $4200 I did pay.

A little bit of something is better than a whole lot of nothing. That’s what I should have remembered, and it’s what I hope you think about if you’re in this situation.

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If you're planning on enrolling in a health care marketplace plan this year, remember that open enrollment begins November 1st. Here's a list of qualifying events that will let you buy a plan now instead of having to wait for open enrollment.

Photo: Teymur Madjderey