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Temporary health insurance on the rise

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Many forms of protection
Premiums of short-term coverage are likely cheaper than the premiums paid for COBRA. However, the fees can still seem high for a person who just lost his or her job. It may be tempting to forgo insurance altogether, but financial security is the main reason people buy short-term health insurance in the first place.

"Many people don't understand the trade-offs between the cost of a doctor's visit co-pay (under employer-sponsored plans) versus the true expenses of a catastrophic illness," says Andrews.

Without coverage, an unexpected trip to the hospital could send a family several thousands of dollars into debt. Several published studies cite medical bills as a leading cause of bankruptcy. Short-term health insurance is designed to cover these catastrophic events.

"It is financial protection that also happens to protect your health," Andrews says.

Beyond financial protection, temporary insurance can also help prevent future insurance claims from being rejected under federal HIPAA, or Health Insurance Portability and Accountability Act, laws.

"An employee can get new health insurance through their new employer, and it can be a fabulous plan. But if (the employee) was uninsured for longer than 63 calendar days, the new health plan can deny (his or her claims) for pre-existing conditions for one year," says Guariglia.

In other words, treatment for existing conditions such as high blood pressure, allergies or diabetes would remain uncovered for up to a year after enrolling in a new employer's comprehensive health plan.

"It is a short-term issue," says Guariglia. "But it can be become a long-term issue with severe financial effects."

The good news is that approved short-term insurance products are "creditable," meaning policyholders escape the "uninsured" label. This applies even if the short-term plan never even offered coverage for those same pre-existing conditions. Of course, the short-term plan would still have to be purchased within the 63-day limit, and it would have to be a true insurance product, not a private "reimbursement" product.

Private products, also called discount plans or nonlicensed risk-sharing plans, are often marketed as a way to control medical costs, but these plans are not licensed by state insurance departments and they are not considered to be health insurance.

"If the plan you bought short-term met the minimum guidelines for health insurance, you would not have an issue," says Guariglia. Different states may have different requirements and restrictions, so check with your state's insurance department for answers to specific questions. State Web sites also offer extensive insurance information.

Where to find short-term health insurance coverage
"If you are looking for a personal touch, perhaps your agent would be the best place to start," says Andrews.

Agents and brokers have knowledge of the different regulatory requirements in your area, and they should be able to explain how those requirements affect your coverage. Contact your existing car or homeowners insurance agent, or even the agent who handles your former employer's insurance. If they can't sell you a policy directly, they are probably able to recommend an experienced professional who can.

Next: "Short-term medical plans usually run from 30 days to ... one year."
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Cut health care costs before treatment
Sorting out medical insurance options
Taking your health insurance abroad
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