Why buy short term care insurance?

If you are unable to take care of yourself, even for a short period of time, the cost of care can add up quickly.

The Administration for Community Living found that the national average costs of care include:

  • $225 a day or $6,844 per month for a semi-private room in a nursing home.
  • $253 a day or $7,698 per month for a private room in a nursing home.
  • $119 a day or $3,628 per month for care in an assisted living facility (for a one-bedroom unit).
  • $20.50 an hour for a health aide.
  • $20 an hour for homemaker services.
  • $68 per day for services in an adult day health care center.

Short-term care coverage can help you with these kinds of costs. Plans will pay between $100 and $200 each day to help with the cost of care.That’s $6,000 a month to offset costs.

Among the biggest selling points of this limited coverage is the price. Here are typical premium costs, according to the American Association for Long-Term Care Insurance, a trade group:

  • Age 65 with home care coverage only: $63 a month
  • Age 65 with home care and nursing home benefit: $125 a month

Short-term care also pays in addition to Medicare, while long-term care insurance doesn’t.

Simplicity is an advantage to short-term care. There’s no medical exam required, so the application process is faster and simpler, compared to the process for long-term care insurance. Typically, applying for short-term care involves just filling out a short questionnaire. You can also still buy short-term insurance up to age 89, while most long-term care policies cut off applicants at about age 75.

Applications usually have less than 10 health questions. The company approves or denies you based on how you answer those questions.

It might be harder for you to find a short-term care plan than a decade ago. The long-term care insurance market is shrinking. According to a 2022 National Association of Insurance Commissioners (NAIC) report, the number of insurance companies offering long-term care has dropped. Only a dozen or so companies sold such policies in 2020 compared to over a hundred in 2004.

How does short-term care insurance work?

It’s pretty straightforward: you pick a benefit amount, usually offered in $10 increments from $50 to $300 per day, and the number of days (up to 360) that you want to receive the benefit.

The majority of policies go into effect immediately. That means the policy pays on the very first day you qualify for benefits. Most traditional long-term care insurance policies (about 94%) are sold with a 90-day deductible that must be met before benefits are paid.

The triggers for benefit eligibility for short-term care insurance generally are the same as they are for long-term care coverage. The policy pays for care when the insured can't perform at least two of six "activities of daily living" without help -- eating, bathing, transferring in and out of a chair or bed, dressing, toileting, and continence -- or has a cognitive impairment.

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COBRA

Consolidated Omnibus Budget Reconciliation Act
People who lose their employer-sponsored health insurance may qualify for a COBRA plan. COBRA lets you keep your former employer's health plan, but you're responsible for paying all of the costs, including your former employer's portion.
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Medicare

People who are 65 and over qualify for Medicare. You can choose Original Medicare (also called Parts A and B), which is offered by the federal government, or Medicare Advantage (also called Part C), which private insurers provide. The average annual premium for Original Medicare is about $1,600. Medicare Advantage's average yearly premium is $336, but you may have higher out-of-pocket costs than Original Medicare.
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Medicaid

Low-income Americans qualify for Medicaid. Thirty-eight states expanded Medicaid eligibility, so lower-middle-class Americans may also be eligible in those states. Medicaid offers comprehensive benefits, but at little to no cost depending on your income. Each state has its own eligibility. Some states are flexible with Medicaid eligibility for people who are pregnant, a parent or disabled. If your household income is below 138% of the federal poverty level, you're likely eligible for Medicaid if you live in a Medicaid expansion state. That level is $17,609 for an individual, $23,791 for a family of two, $29,974 for a family of three and $36,156 for a family of four. Non-Medicare expansion states have stricter income guidelines. Check with your state's Medicaid program to see if you qualify.
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The Affordable Care Act lets children stay on a parent's health plan until the age of 26. Having a child on a parent's health plan may or may not increase premiums. It depends on whether you already have family coverage when adding the child to the plan. If a parent already has family coverage, adding a child won't likely increase premiums. However, going from single or couple to family coverage could cause premiums to skyrocket. The average single coverage employer-sponsored plan premium is $1,186. The average family plan is $5,447.
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Most people with private health insurance get their coverage through a job. employer-sponsored health insurance is usually cheaper than individual health insurance unless you qualify for Affordable Care Act subsidies. Job-based plans are generally less expensive because businesses often pick up more than half of employer-sponsored health insurance premiums. Kaiser Family Foundation estimates the average premiums for a single coverage employer-sponsored health plan is $1,186 and the average family plan is $5,447 annually.
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Employer plans are often one of these types of four plans. Click on each one to find out more.
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Preferred-provider Organization (PPOs)

  • Pay higher premiums with a lower deductible
  • You have access to more providers, but pay much more for health insurance
  • You don't want to choose a primary care physician
  • You don't want to get a referral
  • You want the ability to get out-of-network care
Preferred-provider organization (PPOs) plans are the most common type of employer-based health plan. PPOs have higher premiums than HMOs and HDHPs, but those added costs offer you flexibility. A PPO allows you to get care anywhere and without primary care provider referrals. You may have to pay more to get out-of-network care, but a PPO will pick up a portion of the costs.
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Health maintenance organization (HMO)

  • Pay higher premiums with a lower deductible
  • Restricted network of providers with lower premiums
  • You want to choose a primary care physician
  • You don't mind getting a referral
  • You don't care about the ability to get out-of-network care
Health maintenance organization (HMO) plans have lower premiums than PPOs. However, HMOs have more restrictions. HMOs don't allow you to get care outside of your provider network. If you get out-of-network care, you'll likely have to pay for all of it. HMOs also require you to get primary care provider referrals to see specialists.
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High-deductible health plans (HDHPs)

  • Pay lower premiums with a higher deductible
High-deductible health plans (HDHPs) have become more common as employers look to reduce their health costs. HDHPs have lower premiums than PPOs and HMOs, but much higher deductibles. A deductible is what you have to pay for health care services before your health plan chips in money. Once you reach your deductible, the health plan pays a portion and you pay your share, which is called coinsurance.
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Exclusive provider organization (EPO)

  • Restricted network of providers with lower premiums
  • You don't want to choose a primary care physician
  • You don't want to get a referral
  • You don't care about the ability to get out-of-network care
Exclusive provider organization (EPO) plans offer the flexibility of a PPO with the restricted network found in an HMO. EPOs don't require that members get a referral to see a specialist. In that way, it's similar to a PPO. However, an EPO requires in-network care, which is like an HMO.
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Individual insurance/Affordable Care Act
The Affordable Care Act created insurance exchanges that allow people to compare plans. The health law also requires insurers to accept everyone and not charge them exorbitant rates. People who make below 400% of the federal poverty level qualify for subsidies to help pay for an ACA plan.
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Individual insurance/Affordable Care Act
The Affordable Care Act created insurance exchanges that allow people to compare plans. The health law also requires insurers to accept everyone and not charge them exorbitant rates. People who make below 400% of the federal poverty level qualify for subsidies to help pay for an ACA plan.
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People who would prefer to pay lower premiums with a higher deductible may want the below plans
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Silver is the second most popular plan in the ACA exchanges, with 35% of people with a Silver plan. Silver has lower premiums than any plan except for Bronze. However, it has lower out-of-pocket costs than Bronze. Silver plans pick up 70% of the costs, while members pay 30% The average single coverage in a Silver plan is $481 monthly and $1,179 for a family plan.

Bronze is the most popular type of plan in the ACA exchanges, with 41% of members with a Bronze plan. These plans have the lowest premiums, but also the highest out-of-pocket costs in the exchanges. Bronze plans pick up 60% of the costs, while members pay 40%. The average single coverage monthly cost in a Bronze plan is $440 and $1,080 for a family plan.

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Individual insurance/Affordable Care Act
The Affordable Care Act created insurance exchanges that allow people to compare plans. The health law also requires insurers to accept everyone and not charge them exorbitant rates. People who make below 400% of the federal poverty level qualify for subsidies to help pay for an ACA plan.
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Platinum plans have the highest premiums but the lowest out-of-pocket costs. So, you pay more for the coverage initially but less than other plans when you need health care services. Platinum plans pick up 90% of the costs, while members pay 10%, Not many health insurers offer Platinum plans. Only 2% of members in ACA plans have a Platinum plan, so you may have trouble finding one. The average monthly premiums for single coverage in a Platinum plan is $706 and the average family coverage costs $1,460.

Gold plans have lower premiums than Platinum, but higher premiums than Silver and Bronze. Gold also has lower out-of-pocket costs than Silver and Bronze, but higher than Platinum. Gold plans pick up 80% of the costs, while members pay 20%. The average monthly premium for a single Gold plan is $596. Family coverage averages $1,426 per month.

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Short-term care buyers: Who are they?

For some buyers, short-term care policies are a good addition to traditional long-term care insurance because they provide some protection for that 90-day period when you need care. For others who either waited too long to buy long-term care and are now priced out or for those who can’t afford it all but want some protection, short-term care is an affordable option.

It is true that some long-term care claims last for many years; however, almost half (49%) of long-term care insurance claims last one year or less, according to the short-term care advisory center.

The American Association for Long-Term Care Insurance suggested people who may be interested in short-term care insurance include:

  • A person declined traditional long-term care coverage.
  • Someone who wants a cheaper alternative to traditional long-term care insurance.
  • People over 80 years old.
  • Those who want to cover the elimination period in your long-term care policy.

Depending on the company, you must be somewhere between 40 and 89 years old. Some companies limit applicants further and don’t offer coverage after age 85.

As with any insurance purchase, research companies carefully. Some insurers are much easier to work with when it comes time to file claims than others. Look at company track records for complaints, and read the fine print to find out exactly what is covered and what isn’t. You’ll also want to decide how much you can pay yourself for care when calculating how much coverage you’ll need.

Health insurance FAQs

what is short term care insurance?

Short-term health insurance policies offer coverage for less than one year. The coverage is not as robust as that of a standard health insurance plan. For example, a short-term plan may not offer as many benefits as a typical one. It might also lack some consumer protections.

Is short term care insurance for seniors?

Short-term care insurance is designed to provide coverage for seniors who need assistance with daily living activities for a limited period, usually up to one year. It helps cover the costs associated with short-term care services such as nursing home care, assisted living facilities, or in-home care. This type of insurance can be beneficial for seniors who may not require long-term care but need temporary assistance due to illness, injury, or recovery from surgery.

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