The Value of a Certificate if Creditable Coverage (Part 1)

Often the most valuable feature of short term medical insurance is the Certificate of Creditable Coverage that is automatically issued by law at the termination of every STM policy. Under federal law, every employer provided policy must cover the pre-existing conditions of a new enrollee who has proof of continuous coverage in the form of a Certificate of Creditable Coverage. This simple piece of paper can be worth thousands of dollars and could easily mean the difference between financial survival and financial ruin for many people.

Take the fairly common example of a healthy active middle-aged weekend warrior type of guy who needs orthopedic knee surgery. His old sports injuries are causing increasing pain and he hopes to schedule an arthroscopic procedure as soon as possible. He suddenly changes employment for any reason; or perhaps his spouse who carries medical insurance for the couple changes her employment. In either case, any new group health insurance plan has a waiting period before benefits can begin so there is risk that the proposed surgery will not be covered. Going ahead with the treatment could be disastrous; the cost for even a simple knee procedure is likely over $20,000. If there is a gap in employment between jobs, the waiting period without coverage will be longer. If the gap in coverage is longer than 62 days then we are just out of luck - there is no benefit provided by either the old or new health insurance company for the pre-existing condition. The new waiting period where treatment could not be covered could range from six months to several years.

But the solution is easy - if he carries short term medical insurance, his knee surgery can be covered from the first day of his new group coverage. In fact, the trend is to schedule this surgery on a Thursday or Friday and be back in work by the following Monday.

In other words, the simple solution of taking an STM policy at a cost of a few hundred dollars gives this fellow in our example a financial benefit of tens of thousands of dollars. In this example, it is easy to place the tangible value of the policy almost exclusively on the Certificate of Creditable Coverage.