Short-term insurance helps cover the gap
TERRY SAVAGE SUN-TIMES COLUMNIST Jan 4, 2007
Updated: May 3, 2013 12:14PM
Graduation means the end of studying, exams, term papers and grade point averages. Now grads can start worrying about the real stuff. Things like a job, a place to live, paying off student loans -- and making sure you have health insurance.
Health insurance might be the last thing on your mind on graduation day. But if you've been covered under your parents' health insurance, it's almost a sure thing that graduation day means you no longer qualify for coverage.
You might be starting a new job soon, knowing you'll have health insurance from the company. But a lot could happen between now and then -- and a broken leg or injuries from a car accident could be very costly during this gap in coverage.
The solution is short-term health insurance, policies designed exactly for people in your situation. They're perfect for graduating students or those who lose a job and can't afford COBRA coverage provided by their former employer.
How it works
You purchase a policy for one month, or longer, up to six months. Then, if you still don't have a permanent policy from your new employer, you can re-apply for your short-term policy for another six months. After that, you must find permanent coverage. But if you do get that new job, you can cancel with no penalty.
These short-term policies cover hospitalization and surgeries as well as doctor's visits and other professional services. But the real benefit is knowing that in case of extraordinary medical problems, coverage is available.
Policies are sold with deductibles ranging from $250 to $2,500. They have co-payments ranging from 50/50 to 80/20. The amount of the deductible you're willing to assume, plus the amount of the co-payment you agree to will determine the monthly premium. But premiums are quite reasonable.
For example, a 22-year-old male living in downtown Chicago could purchase a policy from Golden Rule with a $2,500 deductible, and an 80/20 co-pay, for $47.25 per month. Lowering the deductible to $1,500, raises the premium to $56.70 per month. Golden Rule says the average price across all of its markets with a $500 deductible is $57 per month.
The application process for a short-term policy is simple. But a pre-existing condition will disqualify you, and if you don't answer the questions honestly, you'll risk not being covered if you submit a claim. You can pay your first bill by credit card or bank transfer, so the coverage goes into effect immediately.
Though short-term health policies have been around for a while, in recent months the field has become more competitive, so prices have declined, and benefits are more attractive.
The two leaders in the field are Golden Rule, a division of United Healthcare, and Assurant Health (formerly Fortis), a Milwaukee-based provider of individual and group policies.
Price comparisons are easily made at www.eHealthInsurance.com, where there's a special section for short-term health insurance policies. Or you can go directly to the two companies' Web sites: www.GoldenRule.com or the Assurant Health Web site, www.temporaryinsurance.com.
The monthly premium is important, but equally important is the breadth of the provider's network of health care professionals and hospitals.
You'll want to use an in-network provider with these policies, to take maximum advantage of the discounts provided. Golden Rule claims to have an edge with lower premiums in 75 percent of the ZIP codes in the country. It also claims that its discounts on cost of service are greater because the parent United Healthcare owns a huge network of providers with tremendous volume.
A major caveat
There's one caveat to keep in mind with short-term health insurance policies. They work fine, but only up to one year. If during that period you encounter an illness, disease or accident that will have long-term consequences, you'll be deemed to have a pre-existing condition when you ultimately seek permanent health insurance. Then costs related to that condition might not be covered, or not covered for at least one year.
So if you have a short-term need for health insurance, and figure you'll probably have permanent coverage from a job in a few months, then these policies are the perfect solution to a potential gaping hole in your financial security. And that's The Savage Truth.
Terry Savage is a registered investment adviser.
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