She Saved Premium on Insurance, Then Faced a $500,000 Medical Bill: The Hidden Risks of Short-Term Health Insurance

Many Americans assume that having health insurance means they are protected from overwhelming medical bills.

Unfortunately, that is not always the case.

A recent NBC News report highlighted the story of a woman who learned just how complicated short term health insurance can become when a serious medical condition suddenly appears.

Lisa Brundige, a woman in her 60s, turned to a relatively inexpensive short term health insurance plan after losing access to her previous coverage. Later, she developed unusual sensations in her leg. Medical tests revealed a large tumor that was pressing against her spinal cord.

She needed surgery.

The medical bills eventually reached approximately $500,000.

Then came the insurance dispute.

The insurer initially determined that the tumor could be considered a preexisting condition and denied the claim.

The woman said she had no idea that the tumor existed and had not previously experienced the same condition.

There is an important detail that should not be overlooked. The insurer did not ultimately leave her responsible for the entire $500,000 bill. After NBC News contacted the insurer, the company reviewed the case and eventually approved the claim.

The real lesson is not simply that a $500,000 bill was received.

The lesson is that having an insurance card does not necessarily mean every medical expense will be covered.

Why Can Short Term Health Insurance Be So Cheap?

Short term health insurance was originally designed to provide temporary coverage during a gap between health insurance plans.

Someone changing jobs, waiting for new employer coverage, or experiencing a temporary insurance gap may consider a short-term plan because the monthly premium can be substantially lower than some ACA Marketplace plans.

But there is an important tradeoff.

A lower premium can come with fewer consumer protections and more limitations.

Short term plans are not subject to all the same requirements as ACA Marketplace comprehensive health plans.

One of the most important differences involves preexisting conditions.

That means consumers should never compare these plans based only on their monthly premium.

The more important question is what the plan will actually pay when you become seriously ill.

The Pre-Existing Condition Problem

One of the biggest differences between ACA Marketplace coverage and short-term health insurance involves preexisting conditions.

ACA Marketplace plans must generally cover preexisting conditions. An insurer cannot deny coverage or charge someone more simply because that person had a medical condition before enrolling.

Short term health insurance does not provide the same ACA protection for preexisting conditions.

This can create significant financial risk.

A person may believe they are healthy when they purchase a short-term plan, only to discover later that an illness or condition is considered related to a prior medical problem.

Cancer, heart disease, neurological conditions and other serious illnesses can involve extremely expensive treatment.

The fact that you feel healthy today does not necessarily mean a short-term plan will provide comprehensive protection tomorrow.

ACA Coverage and Short-Term Insurance Are Not the Same

ACA Marketplace comprehensive health plans must cover ten categories of essential health benefits.

These include emergency services, hospitalization, surgery, prescription drugs, mental health and substance use disorder services, laboratory services, preventive care and other required benefits.

Short term health insurance does not have to follow the same ACA benefit structure.

As a result, coverage for prescription drugs, mental health care, maternity care, preventive services and other medical needs can vary significantly depending on the plan.

This does not mean that every short-term plan provides little or no coverage.

Some plans may provide coverage for emergency care, hospitalization and surgery.

The critical issue is the contract.

Coverage limits, exclusions and eligibility requirements can vary significantly from one plan to another.

The Real Lesson Behind the $500,000 Medical Bill

The most important part of the NBC News case is not simply the $500,000 price tag.

It is the fact that a person who was paying for health insurance still faced a major dispute over whether her medical treatment would be covered.

She had insurance.

She had an insurance card.

But when a serious medical condition was discovered, the insurer initially denied the claim based on its interpretation of a preexisting condition.

After NBC News contacted the insurer, the company reviewed the case and eventually approved the claim.

This illustrates an important principle for anyone considering short term health insurance.

Having health insurance is not the same as having comprehensive financial protection.

Pay Attention to Coverage Limits

Another important issue is the maximum amount an insurance plan will pay.

ACA Marketplace plans have important protections against annual and lifetime dollar limits on essential health benefits.

They also have an annual out of pocket maximum that limits how much a consumer generally has to spend on covered services in a plan year.

Short term plans do not necessarily follow the same ACA structure.

Consumers should therefore carefully examine the policy for maximum benefits, benefit limits, exclusions and condition specific restrictions.

Terms such as Maximum Benefit, Benefit Limit, Exclusion, Pre Existing Condition and Waiting Period should never be ignored.

Before purchasing a short-term plan, understand exactly how much the insurer could pay if you suddenly needed major surgery or prolonged hospitalization.

Federal Rules Changed in 2024

Consumers should also be careful when reading older information about short-term health insurance.

Federal rules changed significantly in 2024.

For new short-term policies sold beginning September 1, 2024, the federal rules generally limit the initial contract period to no more than three months and limit the total period, including renewals or extensions, to no more than four months.

Existing policies and state specific rules may be subject to different requirements.

That means information published several years ago, may no longer accurately describe the current rules.

Always check the current federal and state requirements before purchasing a short-term health insurance plan.

Seven Things to Check Before Buying Short Term Insurance

First, carefully review the definition and exclusions for preexisting conditions.

Second, determine whether cancer and tumor treatment is covered and under what conditions.

Third, check the maximum benefit for hospitalization and surgery.

Fourth, determine whether prescription medications are covered.

Fifth, check coverage for mental health treatment and maternity care if those benefits are important to you.

Sixth, review the overall maximum benefit and any specific condition.

Seventh, understand what options you may have when the short- term policy expires, including whether you may qualify for an ACA Special Enrollment Period.

A few minutes spent reading the policy before enrollment could potentially prevent a devastating financial surprise later.

What Are the Alternatives During an Insurance Gap?

A temporary loss of health coverage does not automatically mean that short-term insurance is your only option.

You may qualify for an ACA Special Enrollment Period after certain life events, including losing qualifying health coverage.

If you recently lost employer sponsored insurance, COBRA may allow you to continue your existing employer health plan for a limited period, although the cost can be substantial.

If your income has dropped, you may also qualify for Medicaid or another public health coverage program depending on your circumstances and state.

You can also check HealthCare.gov to determine whether you qualify for Marketplace coverage and financial assistance.

Final Thoughts

Saving money on monthly premiums can be appealing.

When you are healthy, the difference between a $100 and $200 monthly premium may seem significant.

But if you suddenly need major surgery or treatment for cancer, heart disease or another serious condition, the difference between insurance plans can potentially become tens or even hundreds of thousands of dollars.

The NBC News case involving a medical bill of approximately $500,000 provides an important warning.

The most important question is not whether you have an insurance card. The question is what that insurance will cover when you need it most.

Before choosing a short-term health insurance plan, look beyond the monthly premium.

Review preexisting condition provisions, coverage limits, exclusions, hospitalization and surgery benefits, prescription drug coverage and the length of the policy.

Cheap insurance can be expensive if it does not provide protection, you expect when a serious medical problem occurs.

Health insurance should not be selected based solely on price.

The real test of insurance is whether it protects you when you need it most.