Superior Insurance Marketing

Displaced employees, recent college graduates, and budding entrepreneurs may have more in common than they think.

They must figure out how to get health insurance that won't break their piggy banks but will give them enough coverage if an emergency arises.

One solution that more people are picking is short-term medical coverage, which can be obtained for lower premiums than long-term policies or an individually paid extension of health benefits from the person's last employer.

Insurance companies, recognizing the growing market for the product, are streamlining the process to permit someone to apply by answering a handful of questions on his or her home computer.

"For students in particular and people between jobs and just starting out in life - that's the worst time to have large medical bills come up," said Ellen Laden, a spokesman for the Golden Rule Insurance Co. in Indianapolis.

"You haven't been able to really accumulate any income and any savings, and that's when large medical bills can wipe you out financially."

The company, for example, has a plan that would cost a single person in his or her 20s $50 a month, with a $500 deductible for the period of the policy. For a $2,500 deductible, the premium drops to $30 a month.

Short-term policies are planned to offer protection in case of an unexpected illness or injury, and not for everyday medical care. They do not cover pre-existing conditions such as cancer, for example, nor do they include dental or vision coverage, as do many long-term plans.

The policies often carry sizable deductibles and hefty co-pays, so normal doctor's visits likely wouldn't be expensive enough to exceed the deductible and have the coverage kick in.

"The thing about short-term coverage is that it's designed to fill a gap, to fill a void. It's not designed to be permanent," said Stan Sieniawski, president of InsureOne Benefits Inc., a consulting firm in the Cleveland area.

Such individually purchased policies are different from the health benefit provisions in the Consolidated Omnibus Budget Reconciliation Act of 1986, which helps cover workers who lost health insurance because they quit, were laid off, or their work hours were cut.

The coverage is handled by the insurance company used by a worker's last employer. And often it is quite expensive, usually $500 or more a month, because the individual bears the entire burden of the premium, plus any co-pays and deductibles. It is usually available for up to 18 months.

The Kaiser Foundation found premiums are $5,000 for an individual and $11,000 for a family for a year under the law.

"A lot of people get sticker shock," said Lisa Horn, manager of health care for the National Society of Human Resource Management.

That's why healthier people desiring medical insurance opt for short-term coverage, said Todd Mierzwiak, president of Westgate Insurance Agency in Toledo.

"The biggest thing that we see in terms of folks are people who are in-between jobs but don't want to pay the COBRA and they're otherwise healthy," he said.

For such short-term individual plans, deductibles typically range from $250 to $2,500, after which the insurance pays 80 percent of the medical bills and doctor visits. Out-of-pocket expenses paid by an individual or a family are capped, usually at $10,000 to $15,000 for the life of the policy.

Anthem Blue Cross and Blue Shield, which does business in Ohio, offers a variety of short-term plans for families.

For example, a family of four can opt to pay $254 a month for up to six months (a total of $1,524), with a deductible for the term of $500 per member or $1,000 per family and an out-of-pocket maximum of $5,500 per member or $11,000 per family. It also has a separate $250 prescription drug deductible per person.

If a child goes to the doctor three times during that period and the visits cost $100 each, the client will pay the full $300 because the deductible has not been met.

If a child breaks an arm and has an emergency-room visit at a cost of about $2,000, the client would pay the first $500 to satisfy the deductible per member, then 20 percent of the remaining $1,500 (or $300).

The plan, then, would cost the family $800 in medical bills, plus the premium costs.

If a family faces a catastrophic illness, that maximum could be met quickly, said Jaime Lebron a regional sales manager for Anthem.

But a family with small children, making multiple trips to the doctor at $100 to $150 per visit, could pay a great deal of money before reaching their deductible, he said.

Instead, he recommends a family consider a long-term individual policy that has co-pays and prescription coverage. Mr. Lebron said it is impossible to estimate an average premium because of the number of variables in designing the policy. But, he said, it's not substantially more than the short-term policies.

"Short-term coverage is always going to be lower because it's a capped coverage. It's only in place for 180 days, so the carrier risk is lower," said Mr. Sieniawski, the consultant. "And with not paying any pre-existing condition, the carrier is really hedging its risk."

Independent agent Kirk Bernhard said a short-term policy with a $500 deductible for a 48-year-old single woman cost the client $135 a month, but a long-term plan would have cost her $347 per month.

Contact Mary-Beth McLaughlin at: mmclaughlin@theblade.com or 419-724-6199.