Short-Term Health Insurance: When It Makes Sense and When It Doesn't

Short-term health insurance is temporary coverage designed to fill gaps. Maybe you're between jobs, waiting for employer benefits to start, or missed open enrollment. These plans are cheaper than ACA coverage and you can usually get approved in a day. But there's a reason they cost less: they cover far less.

What Short-Term Plans Cover (and Don't)

Short-term plans are not required to follow ACA rules. That means they can and usually do exclude coverage for pre-existing conditions, maternity care, mental health services, and prescription drugs. They can impose annual and lifetime benefit caps. They can charge you more or deny you coverage based on your health history.

What they typically do cover: doctor visits, emergency room trips, hospitalization, and sometimes lab work. Think of them as catastrophic coverage that protects you from a massive unexpected bill but doesn't help with ongoing care.

Federal Duration Limits

Under the current federal rule (effective September 2024), short-term health insurance is limited to an initial period of 3 months with a maximum total duration of 4 months including renewals. This reinstated stricter limits after a period when plans could last up to 36 months. Some states impose even tighter restrictions or ban short-term plans entirely.

What They Cost

Average premiums for short-term plans range from $100 to $300 per month, significantly less than unsubsidized ACA plans. But the lower premium comes with trade-offs beyond coverage gaps. Deductibles are often high, benefit caps are common, and if you develop a condition while covered, it becomes a pre-existing condition that the next short-term plan can exclude.

When Short-Term Insurance Makes Sense

Short-term plans can work if you're healthy with no pre-existing conditions, you need coverage for a specific short gap (job transition, aging off a parent's plan before the next enrollment period), you don't qualify for ACA subsidies, and you understand and accept the coverage limitations.

When They Don't

If you have any ongoing health conditions, take regular medications, are pregnant or planning to become pregnant, or need mental health care, a short-term plan will leave you exposed. And in states with individual mandate penalties (New Jersey, Massachusetts, California, DC), short-term plans don't satisfy the coverage requirement, so you'd owe a penalty on top of the premium.

Before buying a short-term plan, check Healthcare.gov. You may qualify for a Special Enrollment Period or for subsidies that make an ACA plan surprisingly affordable. Four out of five marketplace enrollees can find a plan for $10 a month or less after subsidies.