According to the Bureau of Labor Statistics, the nation's voluntary turnover rate is 23.4%. That number surprised me, although I don't know why. In the event, employee turnover is to be expected, and it creates opportunities as well as problems.
One of those problems is what to do with new hires. Typically, such folks are on "probation;" thirty, sixty or ninety days to see if they'll work out (or even want to stay), before they're eligible to sign on to their new employer's health plan. The longer that waiting period, the less hassles (and expense) for the employer, of course, but what does the employee do for health insurance in the meantime?
For many, continuing the insurance from their previous employer is an option (COBRA), but this can be an expensive proposition: since most employer-sponsored plans are also employer-subsidized, and a lot of folks experience major sticker shock when they learn just how expensive that soup-to-nuts co-pay plan really is. On the other hand, if there's an on-going, serious medical problem (pre-existing condition), it may be the only viable option.
Most folks, though, are relatively healthy, and don't really *need* to excercise their COBRA rights. For them, it's an unnecessary expense. But they still want (need) coverage for unexpected medical expenses, and the peace of mind that comes from having some kind of insurance safety-net in place.
And that's where Short Term Medcial (STM) plans come into play. These plans, while not as comprehensive as their full-bore major med counter-parts, offer an inexpensive alternative to COBRA or even individual (underwritten) medical plans. Some are "field issue," meaning that they can be effective almost immediately. All are only modestly underwitten (asking only about serious and/or chronic conditions). And since they're only meant to be in place for a short period of time (a "short term"), can cost far less. Some of my group clients keep a small stack of STM brochures (which include a brief benefits description, rates and an application) on hand, where they can be passed out to new hires who may need temporary coverage.
They're also useful, by the way, for recent graduates, who've dropped off mom or dad's group plan, but need coverage while they're out job shopping (or before starting grad school). And, of course, divorcees who need coverage after they've been dropped from their ex's plan (absent a court order requiring said ex to pay for a regular medical plan).
Sounds pretty good, doesn't it?
So what's the catch?
Well, the first (and most important) is that STM plans exclude any and all pre-existing conditions. Each one will have its own definition of just what constitutes a pre-ex, but generally, these are illnesses or injuries which have the insured has already received treatment for. What, exactly, does that mean? Well a typical pre-ex exclusion on such a plan would look like this:
"A medical condition due to sicjkness or injury for which the insured received medical treatment or advice from a provider within the 5 year period immediately preceeding the effective date of coverage, regardless of whether the condition was diagnosed or not diagnosed; or that produced signs or symptoms withion the 5 year period immediately preceeding the effective date of coverage, which should have caused an oridnarily prudent person to seek diagnosis or treatment."
That last is critical: "an ordinarily prudent person" is a key phrase in insurance policy definitions.
There's one more item which needs to be addressed, and that's how STM plans, COBRA and HIPAA all coordinate. But that's another column.
Henry Stern, LUTCF, CBC is an independent insurance agent in Dayton, OH. A licensed Continuing Education instructor for Ohio and Kentucky, he has well over 20 years of experience in “the biz.” He blogs every day (or so it seems) at InsureBlog.