Health insurance is supposed to protect. But what happens when it doesn't? Carla Sebesta has been finding out the hard way. Last summer, her husband bought her a monthlong health insurance policy. Just before it expired, he bought her another short-term policy, this time for six months, with the same company, Assurant Health. "We just assumed I had coverage for seven months," says Sebesta, 57, of Georgetown, Texas. "We thought it was continuous." Soon after, she was diagnosed with colon cancer. A surgery, a 10-day hospital stay, and six months of chemotherapy later, Sebesta learned in December that she might be on the hook for upwards of $200,000, more than three times what she and her husband earn in a year; her insurance company told her they were denying all of her claims. Although she appealed, she prepared for the worst.
"It [was] pretty overwhelming," she says. "We [were] so focused on how we [were] going to handle all this that I [was] not thinking much about my health." Currently uninsured—her policy ended in January, and her illness, she says, pretty much dashes her chances of getting covered in the individual market—Sebesta is scheduled for surgery, and she may need more chemo. Her cancer appears to have spread.
Sebesta's story serves as a caution for anyone who is considering short-term health insurance. Such plans, which are offered by many major carriers, typically afford coverage for six months to a year, though some are available on a monthly basis. They are generally intended to insure against the unpredictable—accident, injury, or illness—and are heavily marketed as ways for healthy people in life transitions to "bridge the gap" between jobs, say, and prevent lapses in coverage. (Their benefits tend to be limited; vision and preventive care, like vaccinations, aren't typically covered.) They also tend to be much cheaper than other coverage options, according to the National Association of Insurance Commissioners. (Sebesta's month-long policy cost $143.60 and carried a $2,500 deductible.) And with 36,000 jobs axed last month, the average length of unemployment reaching record highs, and the cost of COBRA premiums prohibitively high for many people even if the government's 65 percent subsidy is extended, short-term plans are likely to appeal as an alternative.
[Read more about the COBRA subsidy.]
"[They're] an option that I think a lot of people take," says Karen Pollitz, a research professor and health insurance expert at the Georgetown University Health Policy Institute. "Makes me very nervous."
The plans generally are very strict about pre-existing conditions and don't tend to cover conditions that became manifested during a certain period prior to the plan's start date. So, if someone with high blood pressure is approved, he or she should not expect the insurance company to pay for related medications, for example. Women are often turned away because of pregnancy.
More importantly, says Pollitz, unlike other health insurance, which gives customers the option to renew once the policy ends, short-term plans aren't guaranteed to be renewable. Typically, people can reapply, but each time they do, they are generally starting over as a new applicant, with a new deductible, and it's up to the insurer to decide to accept. Any health problem that arose and was covered during the last short-term policy will now likely be considered a pre-existing condition and probably won't be covered—if the person is even accepted. If coverage is denied, it can be extremely difficult for those with pre-existing conditions to get insured on the individual market, says Pollitz.
"People need to know this so they don't think they can just keep buying short-term medical plans as a way to buy less expensive coverage," says Jonathan Edelheit, chairman of the board of the Voluntary Benefits Association. Such insurance is intended as a stopgap, not permanent coverage. Some plans, he says, distinctly state that they will only OK returning customers for a new short-term policy if there has been "no significant change" in their health.
For Sebesta, these details proved confusing. She had been healthy, she says. But on the last day of her first monthlong plan, her doctor ordered a CT scan to be sure the cause of her constipation wasn't serious. She assumed it wasn't. The next day, when Sebesta says her new six-month plan kicked in, she learned she had an "intestinal obstruction" that could be malignant. Surgery to find out followed a day after. In December—months into her chemotherapy treatments—she received a jolt in the form of a letter from Assurant. That CT scan, as she understood it, meant that she began her new policy with a pre-existing condition. Therefore, nothing related to her cancer would be paid for. She had no idea that her two plans were unrelated to each other, she says. Recently, to her relief, she got word that her appeal has paid off; Assurant is reversing the pre-existing condition determination and will reprocess her claims. Sebesta still doesn't know what the company will pay. "It's going to be a whole lot better, but it's still not over as far as I'm concerned," she says. (Assurant told U.S. News that it can never comment on a customer's coverage because of privacy concerns.)
Short-term plans do have a place and may be a good option for certain healthy people, experts say. College graduates, no longer able to get coverage on their parents' plans, may elect these to tide them over until a first job with benefits starts, for example; so too might folks who are waiting to be approved for a permanent major medical plan or those who have a new job lined up that requires a waiting period before group health insurance can begin (though Pollitz cautions that if they have an accident that makes them unable to work, they could get into trouble). However, experts tend to advise against short-term plans for people who have lost a job, unless they have definite coverage options ahead or understand the pitfalls.
Laid-off workers who choose short-term plans should be aware that doing so disqualifies them from COBRA coverage or "any guaranteed-issue individual health plans commonly referred to as HIPAA Plans," according to eHealthInsurance.com, a website that sells and markets health insurance. HIPAA plans are an option after someone exhausts COBRA benefits, says Ankeny Minoux, president of the nonprofit Foundation for Health Coverage Education, and give people the right to buy an individual policy without being subject to waiting periods before any pre-existing conditions are covered. Short-term plans do not, notes Cheryl Fish-Parcham, deputy director of health policy at Families USA, another nonprofit. And laid-off workers with ongoing medical conditions are especially encouraged to consider COBRA if eligible, since the benefits they had on their previous plan will generally stay the same, say experts. Long-term individual plans generally do not require customers to sign a multiyear contract and will accept payment on a month-to-month basis, says Minoux. So people could get a comprehensive plan and close it out once they find a job with employer-sponsored health benefits, she says. Public programs may also be an option.
For the out-of-work or anyone else who is mulling short-term health insurance, it's clearly important to understand what's involved and to weigh all the alternatives. Sebesta wishes she had known more herself.