Short Term Health Insurance - Out of Pocket Costs

When purchasing short term health insurance, whether is is short-term health insurance between jobs or for another reason, it is important to know some key terms to understand what your out of pocket costs would be. Understanding the basics of out of pocket costs will easily help you choose the most suitable gap health insurance for your needs.

What are some examples of out of pocket expenses with short term health insurance?

• Premium

  A premium is the amount of money you pay to receive insurance. Premiums can be paid for the entire duration upfront or monthly. Often these fluctuate dependent on the deductible chosen.

• Deductible

  The deductible is the amount paid before the short term health insurance plan pays for any basic medical necessities or other services such as doctors' visits. In most cases, the deductible must be met once per the entire period of coverage, but the deductible could be per incident.

• Coinsurance

  After you pay the deductible, the insurance plan will pay in terms of percentage (such as 80% or 70%) up to a certain amount before they start covering 100% up to the policy maximum.

  For example, if the coinsurance is 80/20 to $5,000, and you have already satisfied your deductible:

  • If your bill is $2,000, the insurance company will pay $1,600, and you will pay $400.
  • If your bill is $20,000, the insurance company will pay $19,000, and you will be responsible for $1,000.

• Copay

  Copay is the flat amount fee per service, unlike coinsurance which is in terms of percentage.

  Normally, short term medical insurance plans don't require copay. You must pay only the deductible before the insurance company starts paying the eligible medical expenses.

  However, to discourage the unnecessary use of emergency rooms, and to encourage the use of urgent care instead, some gap health insurance plans waive the deductible and ask you to pay the copay instead such as a flat amount of $50 or $75 for an urgent care visit.

• Out-of-Pocket Limit

  Generally, your out-of-pocket limit is the sum of the deductible, coinsurance, and copay necessitated within the coverage period. Some insurance companies don't include the deductible in the out-of-pocket limit.

  For example, if you have a $1,000 deductible and 80/20 coinsurance up to $10,000, your out-of-pocket limit is $1,000 + 20% of $10,000, or $2,000, for a total of $3,000.

  But if the insurance company doesn't include the $1,000 deductible in your out-of-pocket limit of $3,000, you will have to pay $1,000 + $3,000 (80/20 for first $15,000) for a total of $4,000.

  Some temporary health coverage plans don't have an out-of-pocket limit. In such plans, you must continue to pay the coinsurance up to the policy maximum.

  Therefore, make sure to compare the plans correctly.

• Out-of-Network Expenses

  Most insurance companies determine the out-of-pocket limit based on visits to providers within the PPO network. If you visit providers outside the PPO network, your out-of-pocket expenses will be much higher. In some cases, insurance companies may pay only according to what they would have paid within the PPO network, or they may exclude coverage altogether.

  Therefore, it is always more economical to visit providers within the PPO network.

• Uncovered Services

  Short term health insurance plans, unlike ACA compliant health insurance, exclude certain benefits in many scenarios. If you purchase short term health insurance, you will have to pay for those services out of your pocket.

• Expenses Beyond Policy Maximum

  Unlike ACA compliant Obamacare health insurance, short term plans have a specified policy maximum such as $250,000 or $1,000,000. If you were to incur expenses beyond that amount, you would have to pay the rest out of your pocket.

• Emergency Room Visit

  To discourage emergency room visits for minor illnesses, some short term health insurance plans assess an additional fee of, for example, $250 per visit to an emergency room for an illness that does not result in hospital admission.