Good to Know
This article is part III of a IV-part series to help early retirees make informed healthcare coverage choices for the years before they’re eligible for Medicare. In Part I, we peeled back the onion on faith-based medical cost-sharing ministries. In Part II, we illustrated how Affordable Care Act (ACA) Policies can help. The focus of this article is Short-Term Limited Duration Insurance (STLDI) for health care costs. We’ll break this topic down as follows:
- Regulatory definition,
- Pros and Cons, and
- Client applications.
The National Association of Insurance Commissioners (NAIC) defines STLDI as “…a type of health insurance that provides coverage to policyholders for a period of as little as a month to as long as three years. The plans offer limited coverage and benefits. Short-term plans may offer coverage for some of the same types of health care services as traditional comprehensive health insurance, but they have very different plan designs and are not regulated with the same consumer protections as comprehensive health coverage.”
Next, we’ll illustrate the pros and cons.
Pros and Cons
Fills coverage gaps if no other health insurance is available
Not limited to a specific network of healthcare providers
Potential for lower monthly premiums than ACA and COBRA policies
Catastrophic coverage that can prevent bankruptcy from medical costs
|No Affordable Care Act (ACA) protections and no premium subsidy
Subject to medical underwriting—may be rejected for pre-existing conditions
No renewal of coverage guarantee
May not cover pregnancy
High deductibles and copays
Not available in all states
Short-Term Limited-Duration Insurance may be attractive to early retirees with no preexisting conditions, in good health, and without the budget to pay premiums for COBRA or private health insurance. Even then, a basic Bronze or Silver ACA policy should be compared to STLDI before making a decision. Regrettably, you do indeed get what you pay for with this health insurance. The allure of monthly premiums as low as $200 must be balanced against deductibles that can exceed $10,000, uncapped client co-pays of 30% or more, and a host of exclusions from coverage. The ACA requirement for minimum essential coverage does not apply to STLDI.
The Bottom Line
An experienced health insurance professional should be engaged to help your client understand and select the best available coverage within their budget. Stay tuned for our next and final article—we’ll compare and contrast all of the early retiree healthcare options covered in this series.