Short-term health insurance plans are designed to provide temporary coverage for individuals who experience a gap in health insurance. While these plans can be a low-cost alternative to traditional health insurance, they come with significant limitations and potential risks. Understanding how short-term health plans work, their benefits, and their downsides can help you decide if they are the right choice for you.
What Are Short-Term Health Insurance Plans?
Short-term health insurance plans offer temporary coverage for individuals who need insurance outside of traditional enrollment periods. These plans are designed for situations such as:
- Losing employer-based coverage
- Waiting for new insurance to begin
- Missing the Affordable Care Act (ACA) Open Enrollment Period
- Recent college graduates who are no longer on their parents’ insurance
Short-term plans typically last from a few months up to one year, with the option to renew in some states. However, they are not ACA-compliant and do not provide the same level of protection as marketplace plans.
Pros of Short-Term Health Plans
1. Lower Monthly Premiums
One of the biggest advantages of short-term health insurance is its affordability. Monthly premiums are often 50% to 80% lower than those of ACA-compliant plans. This makes them appealing to individuals who need temporary coverage but want to save money.
2. Quick and Easy Enrollment
Unlike ACA plans, which have a specific enrollment period, short-term plans are available for purchase year-round. Many applicants receive approval within 24 hours and can begin coverage almost immediately.
3. Flexibility in Coverage Length
Short-term plans allow policyholders to choose a coverage period that fits their needs. Some plans last as little as 30 days, while others extend up to 364 days (and may be renewable for up to 36 months in certain states).
4. Nationwide Provider Access
Unlike ACA marketplace plans, which often have restricted networks, short-term plans may offer broader provider access, allowing enrollees to visit a wider range of doctors and hospitals.
Cons of Short-Term Health Plans
1. Limited Coverage
Short-term health insurance plans do not cover essential health benefits required by the ACA. Many of these plans exclude coverage for:
- Pre-existing conditions (such as diabetes, heart disease, or cancer)
- Maternity care (prenatal visits, childbirth, and newborn care)
- Mental health services
- Prescription drugs
- Preventive care (vaccines, screenings, and annual checkups)
Because these plans offer bare-bones coverage, enrollees risk facing high out-of-pocket costs for necessary medical services.
2. High Deductibles and Out-of-Pocket Costs
While short-term plans have lower premiums, they often come with high deductibles—sometimes exceeding $10,000 or more. This means enrollees must pay a significant amount before the insurance starts covering costs.
Additionally, short-term plans may have low coverage limits, capping the maximum amount they will pay for medical services. If a policyholder requires expensive treatments, they may be responsible for most of the costs themselves.
3. No Coverage for Pre-Existing Conditions
Short-term insurers can deny coverage or charge higher rates based on medical history. If you have a pre-existing condition, such as asthma, heart disease, or even a previous injury, you may be denied coverage altogether or face higher premiums.
4. Not Renewable in All States
Federal regulations allow short-term plans to last up to 364 days with renewals for up to 36 months, but not all states permit renewals. Some states, such as California, New York, and Massachusetts, have banned short-term health plans altogether due to their limited benefits.
5. Risk of Medical Debt
Because short-term plans have coverage gaps and benefit caps, individuals who experience serious medical conditions may face huge medical bills. Many policyholders mistakenly believe they have comprehensive coverage, only to find out key services are excluded when they need them most.
Who Should Consider a Short-Term Health Plan?
Short-term health insurance may be a temporary solution for individuals in specific situations, such as:
- Young, healthy individuals who rarely need medical care
- People between jobs who need insurance for a short period
- Early retirees waiting for Medicare eligibility
- Those who missed ACA Open Enrollment and need temporary coverage
However, short-term plans are not a good option for those who:
- Have chronic health conditions or ongoing prescriptions
- Need maternity or mental health care
- Want comprehensive, long-term coverage
Alternatives to Short-Term Health Insurance
If you’re considering a short-term plan due to affordability or limited enrollment options, these alternatives may be a better choice:
1. ACA Marketplace Plans
While marketplace plans have higher premiums, they cover essential health benefits and pre-existing conditions. Depending on your income, you may qualify for premium subsidies that make these plans more affordable than a short-term plan.
2. Medicaid
If your income is low, you may qualify for Medicaid, which offers comprehensive healthcare coverage at little or no cost. Medicaid is available year-round, so you don’t have to wait for open enrollment.
3. COBRA Coverage
If you’ve recently left a job, you may be eligible for COBRA continuation coverage, which allows you to keep your employer’s health plan for up to 18 months (though you must pay the full premium).
4. Health Care Sharing Ministries
Some religious-based organizations offer cost-sharing programs that help cover medical expenses. While they are not insurance, they can be a lower-cost option for healthy individuals willing to take on some financial risk.
5. Catastrophic Health Insurance
If you are under 30 years old or qualify for a hardship exemption, you can enroll in a catastrophic health plan through the ACA marketplace. These plans have low monthly premiums and cover essential benefits after a high deductible is met.
Final Thoughts: Are Short-Term Plans Worth It?
Short-term health insurance can provide temporary, low-cost coverage, but it comes with significant risks due to its limited benefits, high deductibles, and lack of protections for pre-existing conditions. While these plans may be useful for healthy individuals who only need insurance for a few months, they are not a substitute for comprehensive health insurance.
Before enrolling in a short-term plan, carefully review the policy’s exclusions, coverage limits, and out-of-pocket costs. If you need long-term, reliable coverage, consider ACA marketplace plans, Medicaid, or other alternatives that provide full protection.
