As health-care costs continue to rise and become a more substantial financial concern for Americans at every income level, financial advisors are increasingly being asked to weigh in on strategies for insurance and medical costs.
One option that advisors may be asked to weigh in on is the short-term medical plan. These plans are significantly cheaper than comprehensive coverage—premiums are often a fraction of the cost of traditional coverage. This is because they cover a lot less.
More Americans are becoming aware of short-term plans as an option because their coverage costs are rising so quickly. Further, President Trump’s administration has issued guidance to extend these plans and make them more competitive options against traditional, comprehensive coverage.
In some cases, choosing a short-term strategy can help your client avoid thousands in unnecessary premium costs. In other cases, selecting a short-term plan may expose your client to significant financial liability.
In either case, having a good grasp on these options and their differences allows financial advisors to help clients protect themselves and make the best decisions for medical coverage.
Here’s what financial advisors need to know about short-term plans, the risks of purchasing them and a few situations where they may be a good fit for your clients.
What Is A Short-Term Plan?
Sometimes called temporary health plans, these plans are designed to cover consumers who are in between other types of coverage due to a job change, move or another life change. Under current regulations, they cover the purchaser for up to three months and cannot be renewed with the same carrier.
They are different from other coverage options largely because they are not designed to be a long-term solution. Coverage under workplace, Medicare or Affordable Care Act plans extends through 12 months, but these plans have a shorter duration. Further, short-term plans do not cover pre-existing conditions and may or may not cover preventive care or prescriptions, unlike more traditional coverage types.
This means that if your client had cancer three years ago and is in remission but it returns, the short-term plan will not pay for any cancer care.