I started in the individual health insurance market back in April 1993. My whole insurance career was devoted to helping individuals secure good health insurance plans and protecting their insurability by offering non cancellable health insurance plans. Before Obamacare (ACA) insurance companies could pool clients into “classes” then raise rates on the class until all of the healthy people would switch to another health insurance company leaving only the sick to have their policy “discontinued” or cancelled. This was affectionately known as the “death spiral”. Because of this clause in individual health insurance plans, most knowledgeable agents steered clear of short term health insurance. All it took was one bad diagnosed illness and you were marked as “uninsurable” and when the term on the plan ended, you were done purchasing individual plans. However, with Obamacare starting January 1, 2014, there will be no more preexisting conditions, short term health insurance plans are a great option for the rest of 2013. Let’s explore this option.
I have a client who is uninsurable by today’s standards pre Obamacare, so preexisting conditions apply. She is in her mid 40’s with a son with medical issues as well. Their premiums for the two of them on their current plan went from $725 per month to $879 per month. They had to drop the coverage and take their chances. Normally, there was really nothing that could be done in the individual market. However, since as of January 1 they will qualify for any individual health insurance plan they would like to purchase, it makes sense to move them to a short term health insurance plan because their issues are not serious enough to be excluded under this type plan. Their premiums will drop to $270 or a monthly savings of $609 per month. Thus avoiding going without coverage for the rest of this year. Short term health insurance usually does a very good job paying claims. Now that the preexisting condition clause is removed January 1st, this is a good option for those who are forced to drop their health insurance coverage because of these steep rate increases.
It is still critically important to have some type of health insurance in place. A friend of mine who purchased a short term health insurance plan found out just how critical it is to be covered. While contemplating going without coverage because his COBRA option was outrageous at his prior company, he made the wise decision to purchase a short term health insurance plan. One evening, his 1 year old son was about to fall and get hurt so his wife awkwardly jumped up to grab him and tore her MCL in her knee. Long story short, her outpatient surgery and therapy bills quickly topped $54,000. But because of his decision to buy a short term health insurance plan at $270 for a family of four, he only had an out of pocket expense of $3,400, which ultimately saved him from filing medical bankruptcy from owing the $54,000.
There is still more uncertainty than certainty when it comes to the implementation of Obamacare. The one constant regardless of this law remains that medical expenses are outrageously expensive and without some type of good health insurance plan in force people are playing Russian Roulette with a fully loaded gun and risking everything they have worked for in a bankruptcy.
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“He who knows nothing is closer to the truth than he whose mind is filled with falsehoods and errors.” – Thomas Jefferson
Tim Wilhoit is owner/principal of Your Friend 4 Life Insurance Agency in Nashville, TN. He is a family man, father of 3, entrepreneur, insurance agent, life insurance broker, salesman, sales trainer, recruiter, public speaker, blogger and team leader with over 25 years of experience in sales and marketing in the insurance and beverage industries.
I never thought of it that way, thank you for the article.
Thank you for the kind words. It made sense to me.
selling the hell out out of SHORT TERM and loving it.
You go Donald! Thanks for affirming my thoughts.
I’ve spent the last 6 months TRYING to get carriers to put down a plan for 2013. Only one is even close. The rest have literally fallen off the planet.
As a customer – what do I do? Pay the outrageous bill? Wait till the last second to decide.?
As much as an agent may want to be loyal to a particular carrier in the end it’s #1 – the customer and # 2 – us.
I really expected more and better from the carriers.
Donald, I understand your frustration. I am certainly no spokesperson for the carriers, but what I have learned in my past 20+ years is that insurance companies change very gradual. They turn like a battleship in a bathtub. Now with the passage of Obamacare they are forced to change drastically and rapidly which is not in their nature. Unfortunately, I believe most of this change will come down to the last minute. There is a termendous level of confusion with interpeting the law and I believe there is a lot of fear in making bad decisions.