Tuesday, January 26, 2010

Short Term Medical Pitfalls

Many times people will buy a Short Term Medical (STM) plan as a stop-gap or bridge between coverage. Most of the time things work out. You have purchased a plan, "just in case something happens", and you never have to use the plan.

But sometimes you actually need your short term health insurance plan to do more than originally planned.

As indicated, short term medical insurance plans are designed to fill a gap in coverage when transitioning from one health insurance plan to another. Many times you will purchase the coverage for a specific time period, such as 3 months. Others may have an undetermined need and purchase their STM on a month to month basis.

In either case, coverage expires at the end of the term, usually 6 months or in some cases 12 months. If you need health insurance after the term expires you apply for a new plan.

Unlike traditional major medical insurance, short term medical plans do not renew. With each application you start a new waiting period on pre-existing conditions.

Short term medical plans usually have very loose (by traditional standards) underwriting qualifications. As such, many who cannot qualify for a traditional health insurance plan may be accepted by a short term medical plan.

STM plans have a very unique characteristic that allows this "flex underwriting" and at the same time keeps the rates low. Short term health insurance plans do not cover anything for which you have been diagnosed or treated for in the 5 years immediately prior to the effective date of coverage.

This is true if you are a new applicant, or re-applying for a new term with the same health insurance company.

Therein lies the rub.

I got a call a short while ago from a client. Last year we looked at health insurance plans that would meet her needs and budget. Money was tight and since she was getting married in a few months she decided to pick a short term medical plan with a lower price.

She applied. Coverage was issued. Her wedding date was postponed.

Coverage expired at the end of 6 months so she applied for a new health insurance plan and was approved.

Three weeks after the new short term medical plan went into effect she was involved in an auto accident. Injuries were serious and to make matters worse, the other driver only had minimal auto insurance coverage.

The good news is, her short term plan did what it was supposed to do and has paid out over $100,000 in benefits to cover 4 surgery's as well as medication, doctor visits and so forth.

The bad news is, she will need at least 3 more surgery's and her 6 month policy is coming to an end in a month.

She called, looking for a permanent major medical plan that will pick up where this one leaves off and pay for future surgery, rehab, etc..

I had to break the bad news to her. She can't get a new major medical plan with anyone until she is released from a doctor's care for her existing conditions. Any new STM plan will not cover treatment for this injury since it is a pre-existing condition.

This was not good news.

I am not the type to beat up my clients and make them take one plan over another. Rather, I outline their options, give them advice, and let them pick. If they are leaning toward a plan that has pitfalls, I encourage them to avoid that plan but in the end I say the same thing.

"This is your plan and your money. Pick the one that satisfies your needs and budget".

That is what my client did. She picked a plan that fit what she felt like were her needs at the time. The few dollars saved will do nothing to make up for the emotional and financial impact of future treatment without the benefit of health insurance to pay the bills.

Georgia Insurance Shop is a leading resource for health insurance information. We offer a wide range of affordable Georgia health insurance plans to fit any need or budget and we do not charge extra for expert advice.

And for our California readers, Bill Halper offers great advice as well.
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