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Flex-Term Medical Insurance

by Tony Novak, CPA, MBA, MT
, revised 11/21/2011

Flex-term medical insurance is a popular and inexpensive way to get high quality individual or family health coverage. The name “flex-term” refers to the fact that these plans are designed to last for some period of time that is determined by the enrolling member. These health insurance policies have a stated maximum length of coverage similar to a term life insurance policy. Some people may need coverage for only a month or two while between jobs. Others may need coverage for two or three years while building a new business. In all cases these plans are designed to terminate and be replaced with more traditional group coverage at some date in the future. In the meanwhile, they provide coverage for catastrophic expenses and preserve HIPAA eligibility for coverage of pre-existing medical conditions when moving to another plan in the future.

These flex-term plans are significantly more affordable than traditional group medical insurance plans – usually 30% to 50% less expensive prevailing group rates. These plans are suitable for most of the 6 million Americans who drop off of group health insurance plans each month. An increasing number of people turn to the Internet for automated enrollment in these flex-term medical plans, they are also available through paper mail-in or fax-back enrollment.

Here are ten tips that will help you get the most from a flex-term medical insurance plan:

1. Compare Prices Online - Most states have two or more low cost flex-term medical plans, so it makes sense to compare prices. Using the Web makes this process easy by lining up plans that are available in your area for a side-by-side comparison. The basic coverage is similar between the various plans, so price may be the most important distinction for many shoppers. For example, one plan called “American Health Shield” usually is the least expensive plan for those in the 20-something age group, but is intentionally priced to be less attractive than the other choices for those over age 40.

2. Pay in Advance for Discounted Premiums – Some of the largest issuers of flex-term medical insurance offer a significant discount if you pay for up to a year in advance using the “single pay” policy option.

3. Use the PPO Discount network - While flex-term medical plans cover expenses with any doctor or hospital nationwide, you can still benefit from significant savings by utilizing PPO discounts included with the flex-term medical plan. One plan issued by HPA includes a discount prescription drug plan and Fortis Health includes the popular nationwide PHCS PPO network. PPO discounts on prescription drugs can be used even when the basic charge is not covered by the policy due to a pre-existing condition limitation.

4. Find the Length of Coverage You Need – Some of the least expensive plans expire after 6 months and then require a new enrollment to continue coverage. These short term plans are most popular with people changing jobs that have a short gap in coverage. At the other end of the scale, HPA plans typically extend for up to 3 years and allows unlimited number of re-applications. This longer term plan is more popular for self-employed individuals.

5. Consider Health Factors – Different plans treat prior medical conditions differently for purposes of eligibility. The HPA plan, for example, is the easiest to qualify for if you have ongoing health issues. High blood pressure medication, for example, will exclude you from coverage with Fortis Health but you are still eligible for coverage under the HPA plan.

6. Use the Best Doctors – Flex-term medical coverage allows you to use any doctor or hospital anywhere in the country. So it makes sense to use the best medical providers you can find. Your out-of-pocket cost is limited to your deductible and in some cases a co-insurance regardless of the amount of the medical bills.

7. Consider State Rules – Flex-term medical insurance is meant to be portable. But if you happen to live in Massachusetts, New Jersey, New York, or Vermont then this type of medical insurance is not available. If you are moving from state to state, you can get coverage in these restricted states if you enroll before you move. Once issued, coverage is equally valid throughout the U.S. and Canada regardless of where you may travel or move.

8. Get Fast Service - One of the strongest features of flex-term medical insurance is that coverage is issued immediately. Most people apply online but your agent can often manually issue policies instantly and deliver your policy and ID card electronically within minutes. Overnight delivery service is available if necessary.

9. Get Your ID Card Immediately - Your policy is usually mailed on the next business day, but some insurers offer the ability to print your policy and ID card immediately when you enroll online.

10. Use OnlineAdviser Service - The professional enrollment adviser at Freedom Benefits has helped issue thousands of these policies in every state across the nation where flex-term medical insurance is available. A brief conversation with a knowledgeable benefits adviser can often result in a significant savings of time and money.

Status: obsolete

Most flex-term policies were discontinued and replaced with short term medical insurance following implementation of federal health reform law in 2010.

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