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Short-Term or temporary insurance coverage
is probably the most incorrectly used health
insurance product in the Texas market.
Short-term coverage should be used in very
specific circumstances. However, since the
coverage is easy to apply for and is very
cost competitive, the insurance is often
purchased for situations not suitable for
that type of coverage.
Short-term coverage is defined as Texas
health insurance that has a stated effective
date of coverage and termination date of
coverage with a term of coverage no more
than 12 months. Short-term coverage only
provides benefits for medical conditions
occurring during the term of the short-term
coverage and will not provide any benefits
for health conditions that existed prior to
the effective date of coverage. There are
two situations where short-term coverage is
applicable and will provide benefits with
the lowest level of risk exposure.
Short-term coverage should be used to fill a
gap in coverage between one policy and a new
policy that takes effect with a known future
date. The best example of when short-term
coverage should be applied is when a group
policy terminates and benefits under a new
group policy are not available until the
eligibility requirements are met, typically
after 60 or 90 days of employment.
Short-term coverage can be put in place to
provide health insurance benefits during the
period of time prior to the effective date
of new group health insurance coverage.
The
important aspect regarding short-term
coverage is that the policy is not
considered creditable coverage. This does
not mean that the Texas short-term policy is
marginal or not substantial. Creditable
coverage as defined by C.O.B.R.A. regulation
is the amount of time covered by either
employer-sponsored coverage or long-term
individual coverage that can be used to
offset a preexisting condition waiting
period on a new policy. For each month
covered under a previous policy that meets
the requirements for creditable coverage,
the insured’s preexisting condition waiting
period is reduced by one month.
Employer-sponsored group plans place a
12-month preexisting condition waiting for
an employee’s benefits related to the
condition unless the employee has up to 12
months of prior creditable coverage.
The
insured employee must avoid a 63-day gap in
coverage between two health insurance
policies in order to document continuous
coverage. Although it provides Texas health
insurance benefits, short-term coverage is
typically not considered creditable coverage
and cannot be used to reduce or eliminate
the preexisting condition waiting period
once a new policy has been approved.
Short-term coverage provides coverage during
the waiting period prior to the effective
date of employer sponsored group coverage.
Even though a gap of coverage will be
created because short-term is not considered
creditable coverage, the gap does not result
in a possible loss of benefits because
eligibility is based on the first date of
employment not the effective date of
coverage when benefits are available.
Another
suitable use of short-term coverage would be
to bridge a coverage gap between an
individual or group plan and Medicare
eligibility. If an individual has less than
six months prior to Medicare enrollment,
short-term coverage can be employed to
greatly reduce the cost of health
insurance. Even though the option is
attractive from a cost standpoint, the
insured should be careful in securing such
coverage if there are existing medical
conditions, or symptoms that would be
considered a preexisting condition which
would not be covered under the short-term
policy. This short-term coverage option is
only employed when there are no preexisting
conditions and the insured wants to
significantly lower their health insurance
cost prior to Medicare enrollment.
Short-term can provide a cost competitive
option for coverage while the Texas consumer
waits for benefit eligibility under an
employer-sponsored group plan or Medicare.
It is important to understand when
short-term coverage is beneficial and when
other Texas health insurance options should
be evaluated.
Individual - Family
Texas Health Insurance
Small Business Health
Insurance
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