Can't afford health insurance? Here are some alternatives

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Can't afford health insurance? Here are some alternatives

Updated November 10, 2017

You may have heard that, mostly due to uncertainty around the Affordable Care Act (ACA) caused by the federal government, health insurance rates are increasing for many people. That’s not great, since health insurance is a valuable part of a financial safety net; a majority of bankruptcies in the United States are caused by medical debt.

But if premiums have risen to the point where you can’t get cheap health insurance, or you quit your job and will have a gap in coverage, you should at least get the next best thing: A temporary health insurance alternative. Luckily, there are a lot of options out there, and short-term health insurance, limited benefit insurance, prescription discount cards, healthcare sharing ministries, and COBRA insurance can be viable alternatives or supplements to long-term health insurance.

Short-term health insurance

Barring special circumstances, you can only buy health insurance at one point in the year, during Open Enrollment. That means, if you don’t have coverage for whatever reason, you need to wait until the end of the year to buy it. Unfortunately, that opens you up to the individual mandate tax penalty, and, of course, leaves you without health insurance.

That’s where a short-term health insurance policy comes in handy. Short-term health insurance plans provide coverage for one to three months, but you can (re)apply for short-term insurance at any time, usually with a lower premium and deductible. Short-term health insurance plans are often more flexible, being accepted at more doctors offices and hospitals, compared to traditional health insurance plans, which may have narrowly-defined networks where they’re accepted.

However, there are some downsides to short-term health insurance. Primarily, the dangers come from the fact that the plans are not held to the same standards as long-term ACA health insurance plans.

Short-term health insurance doesn’t protect you from the individual mandate, though you may still come out on top, financially speaking, since the premiums are often less than with ACA plans. Short-term plans also don’t have to include the ten essential benefits, so you have to be careful not to pick a plan that doesn’t cover, for instance, maternity care. You may be getting a barebones policy that doesn’t save you any money in the long run.

Finally, you can be rejected for pre-existing conditions, something that’s not permitted with ACA plans — and short-term plans do not renew; rather, you have to reapply when your coverage runs out, so you’re leaving yourself vulnerable to rejection if your health has worsened since your last application.

Short-term health insurance is just that: A short-term alternative to an ACA plan that provides full coverage

To see how much a short-term health insurance policy might cost you, visit Policygenius partner Agile Health Insurance.

Limited benefit plan

A limited benefit plan isn’t health insurance. It’s more like a way to get discounted medical services. When you have a “medical event” — say, a trip to the emergency room — a limited benefit plan will cover a portion of the cost, either paying you or paying the provider directly. There are usually limits to this — one emergency room visit per calendar year, three doctor office visits per year, etc.

Limited benefit plans typically cost less than health insurance, but depending on the coverage you’re getting, it may cost you more in the long run. For example, $75 in emergency room coverage won’t put a dent in a $4,200 emergency room kidney stone visit.

Example discounts offered by a Limited Benefit Plan

There are also usually constraints on pre-existing condition coverage during the first 12 months of owning the plan. That can really limit what your options are. On the other hand, you can get a wider network, and there aren’t any enrollment period restrictions. That’s a tradeoff you’ll have to consider when looking at limited benefit plans.

To see how much a limited benefit plan might cost you, visit Policygenius partner Agile Health Insurance.

Prescription discount cards

ACA health insurance plans have to include prescription drug coverage. That’s not the case with alternatives, like short-term health insurance. You might be relegated to a prescription discount card, which is something you can actually use with a full health insurance plan, too.

How do prescription discount cards work? Essentially, the card allows you to choose from a network of pharmacies to get your medication at discounted rates (hence the name). If you don’t have health insurance, or have a short-term plan, the savings with a prescription card are readily apparent, because prescription medication can be really, really expensive.

But they even help when you have insurance. Occasionally the discounted price can be cheaper than the medication through your insurer; sometimes a needed drug won’t be on your health insurance plan’s drug formulary, or a high deductible plan might require you to pay for a drug out of pocket. A prescription discount card can allow you to get medication without compromising other aspects your health insurance.

Some prescription discount cards, like Blink Health and Scriptsave WellRx, are free, while others, like the Walgreens prescription discount card, has an annual membership fee (that comes with extra perks).

To see how a prescription discount card can help make your medication affordable, visit Policygenius partners Blink Health or Scriptsave WellRx.

Healthcare sharing ministries

If you’re a fan of personal finance guru Dave Ramsey, you may have heard of healthcare sharing ministries (HSMs). These are a faith-based alternative to health insurance, and although they allow you to avoid the individual mandate, they are careful to point out that they aren’t actually health insurance. Still, there are a lot of similarities between HSMs and health insurance.

You pay a sharing amount instead of a premium; you have a “personal responsibility” instead of a deductible; you pay your medical bills and can get reimbursed, or you can have the HSM negotiate on your behalf.

However, there are also some key differences. Because HSMs aren’t insurance, they don’t follow the same ACA guidelines. That means they can reject people based on their health history, don’t need to abide by the ten essential health benefits, and have coverage limits. And because they’re faith-based, there are more subjective guidelines for members, like abstaining from tobacco and drugs and attending group worship. Members are also encouraged to donate to other members who may need extra help in covering their medical bills.

Despite these limitations, HSMs are a viable alternative for likeminded people who missed Open Enrollment (there are no enrollment periods for HSMs) or find health insurance to be too expensive. Groups like Christian Healthcare Ministries and Liberty Healthshare have huge memberships. If you’re interested in learning more about healthcare sharing ministries, see our full write up.

COBRA

If you just quit or lost your job and are thinking you need to shop for health insurance, consider COBRA insurance.

COBRA stands for Consolidated Omnibus Budget Reconciliation Act. COBRA itself isn’t insurance, it just sets the guidelines that lets you keep your insurance: You can hold onto health insurance from your soon-to-be-ex-employer for up to 36 months.

If you have (or had) good health insurance through your employer, COBRA is worth investigating — especially because it will continue to cover your dependents, too. But keep in mind you have to pay the full (unsubsidized) cost of the policy, plus any administrative fees. That can add up pretty quickly.

If you do lose your job, that qualifies you for a special enrollment period where you can shop for ACA plans again. It’s something you should do, just to see what your options are and how you can keep your health insurance affordable.

Short-term health insurance can also fill this gap at a lower cost than COBRA-ing. Keep that in mind before you blindly stick to the insurance you’ve had, because it may cost you.

You’ve probably noticed a theme here: Choosing temporary health insurance alternatives is all about tradeoffs. You might pay less, but your coverage options are limited; you might have flexibility in networks but none of the same ACA protections; you can enroll when you want, but you probably aren’t protected from the individual mandate.

In the end, you need to make the right choice for yourself, your family, and your budget. There really isn’t a good replacement for a full, ACA-qualified health insurance plan. But if you find yourself in a pinch and need a temporary alternative as a stopgap, it’s nice to know there are options out there.

Disclosure: Policygenius offers insurance policies from many of the nation's top insurers, who pay us a commission for our services. However, all editorial choices are made independently.

Photo: Teymur Madjderey