What is a short-term health insurance plan?

When you’re outside the annual open enrollment period, you have limited opportunities to buy a health insurance plan. You can enroll in an individual plan mid-year if you experience a qualifying life event or become eligible for a federal health insurance program, like Medicare or Medicaid. However, these situations may not apply to every individual.

You can consider a short-term health insurance plan if you need medical coverage outside of open enrollment. Short-term health plans provide temporary coverage and are available year-round from private exchanges. While they’re typically inexpensive, they come with many limitations that make them different from traditional health plans.

This article will explain everything you need to know about short-term health insurance plans to decide if one is right for you and your family.

Takeaways from this blog post:

• Short-term health plans are intended for individuals who need temporary coverage between longer-term insurance plans.
• Because short-term health plans don’t have to comply with Affordable Care Act regulations, they offer limited coverage or higher premiums based on health status, gender, and other factors.
• Beginning September 1, 2024, short-term plans will have a maximum policy duration of three months. If the plan is eligible for an extension, the total policy period can be at most four months.

What is a short-term health insurance plan?

Short-term health insurance plans, also known as gap coverage or temporary health insurance, provide individuals with temporary medical insurance when they lose permanent health coverage outside open enrollment. These plans typically offer limited health coverage.

While all public exchange health plans must comply with Affordable Care Act (ACA) regulations, such as providing minimum essential coverage (MEC), temporary health plans don’t have to adhere to the ACA. That’s because short-term plans don’t meet the ACA definition of individual plans.

Therefore, these plans may offer limited coverage. You may not be eligible to participate if you have a pre-existing condition. Additionally, insurers can differ premiums based on health status or gender with a practice known as medical underwriting.

Because they offer fewer protections for individuals than group or individual health insurance plans, 14 states and the District of Columbia prohibit the sale of short-term health policies entirely¹.

The following states ban short-term health plans:

• California
• Colorado
• Connecticut
• Hawaii
• Maine
• Massachusetts
• Minnesota
• New Hampshire
• New Jersey
• New Mexico
• New York
• Rhode Island
• Vermont
• Washington

Short-term policy durations used to range from a few months to a year. But in March 2024, the Biden Administration set nationwide plan limits on short-term health policies. All short-term health insurance plans issued on or after September 1, 2024, will have a maximum policy duration of three months. The plan’s total duration with renewals can be no more than four months instead of the previous maximum of three years².

Plans must include a comprehensive disclosure notice on the policy’s first page. Any marketing and enrollment materials must highlight the differences between short-term and ACA-compliant plans. This change aims to reduce the number of consumers who may accidentally purchase short-term coverage when instead shopping for a major medical plan.

What does short-term health insurance cover?

Most short-term health plans cover emergency services, urgent care, certain prescription medications, routine doctor visits, medical tests, and preventive care.

Because they’re not ACA-compliant plans, the federal government doesn’t require them to cover pre-existing conditions, maternity care, mental health services, or other essential benefits. If you need these services covered, they may be out-of-pocket costs.

What each short-term plan covers depends on the type of plan, location, and the insurer. However, under the new federal requirements, insurers must now provide individuals with a clear disclaimer explaining the plan’s covered services and any limitations. So, review the plan details carefully before you enroll.

How much does a short-term health insurance plan cost?

Short-term medical insurance plans are generally a more affordable coverage option than comprehensive medical plans. In many cases, the monthly premium can be less than $200. But actual prices vary based on an individual’s location, age, gender, medical history, insurance carrier, and other factors³.

Additionally, you can’t use tax subsidies to reduce your premium as short-term policies aren’t ACA-compliant, meaning insurers can’t sell them on public health insurance exchanges.

Short-term plans tend to have high deductibles, copayments, and coinsurance. Because they are temporary, they also typically have a set benefit cap and may also come with a one-time enrollment fee.

What are the pros of short-term health insurance plans?

Because they don’t provide comprehensive health coverage, short-term health plans may only work for some individuals. However, a few factors may entice those who are considering one.

The following are the advantages of short-term health insurance coverage:

1. They’re a good way for individuals experiencing gaps in coverage to have health insurance if they need emergency care.
2. They have low monthly premiums.
3. You can enroll in a plan outside of open enrollment.
4. Coverage typically becomes active quickly.
5. You can cancel at any time without penalties.
6. It can provide coverage if you need health insurance for a specific reason, like to join a sports league.
7. Depending on your short-term health insurer, you can customize plan design options.

What are the cons of short-term health insurance plans?

While they have their advantages, temporary insurance plans aren’t without drawbacks. Before enrolling, you should consider whether these types of plans will meet your needs.

The following are potential downsides of temporary health insurance plans:

1. The federal government restricts the plan duration to a maximum of three months.
2. They don't comply with the ACA, so they don’t have to cover the ten essential health benefits.
3. You need to disclose your medical history when you submit your application.
   1. If you have certain pre-existing medical conditions, you may not be able to get coverage.
4. They have higher deductibles, copays, coinsurance, and out-of-pocket costs than other medical plans.
5. Certain states and locations prohibit them.
   1. In states that allow them, insurers may not carry short-term plans.
6. They may come with a waiting period before you can start receiving benefits.
7. You could still have a coverage gap if your plan ends outside of open enrollment.
8. Because these plans have limited coverage, you may receive a surprise medical bill in the mail for whatever healthcare costs your insurer doesn’t pay.

Who is best suited for a short-term health insurance plan?

Now that you understand the pros and cons, you may be wondering if short-term coverage suits you.

A short-term plan may be beneficial for you if you experience any of the following situations:

• You had employer-sponsored health insurance but lost your job.
  • You can enroll in COBRA health coverage if you lose your job. But if you don’t want a COBRA plan, you can enroll in a Marketplace or short-term plan instead.
• You missed the annual open enrollment period to purchase comprehensive coverage.
  • If you have a qualifying life event, you can trigger a special enrollment period and enroll in a health plan outside of open enrollment. Otherwise, a short-term plan may be your only option.
• You’ve retired from your job and will be eligible for Medicare shortly.
• You’re a newly hired employee with a waiting period before you can use your employer-sponsored health insurance plan.
• You turned 26 and can’t remain on your parent’s health insurance plan.
  • This also creates a special enrollment period for enrolling in a Marketplace plan. You may also be eligible to enroll in COBRA through your parent’s health plan.
• You’re generally healthy and don’t need many medical services or prescription drugs.
  • Because of the limited duration of these plans, a bronze or catastrophic health insurance plan for the Marketplace is likely a better option.
• You can’t afford a traditional health insurance plan on a public or private exchange.

If any of the above situations apply, you may be a good fit for a temporary health insurance plan. However, you may only qualify if you meet specific circumstances.

You may not be eligible for short-term coverage if:

• You’re pregnant.
• You’re a man weighing more than 300 pounds or a woman weighing more than 250 pounds.
• You’ve previously been diagnosed (or received medical treatments) for HIV or AIDS.
• You have coverage through another health insurance policy.
• You’re eligible for Medicaid.
• You aren’t a U.S. citizen or legal resident.
• You have certain pre-existing conditions.

How do I enroll in a short-term health insurance plan?

To apply for short-term medical insurance, you must complete a health questionnaire detailing your medical history. You’ll also have to list any pre-existing conditions you’ve had within the past five years. Based on your responses, your insurer may disqualify you from obtaining coverage.

If you qualify, you can enroll in a short-term plan directly from an insurer, agent, or health insurance broker. Remember, not all states and companies offer these plans, and you can’t purchase them through the Health Insurance Marketplace or a state-based exchange.

You can enroll in a short-term health insurance policy at any point throughout the year. Your policy may become active the day after the insurer receives your application, depending on your health conditions and the medical underwriting process. You can also choose your preferred effective date.

If your short-term plan ends mid-year, you won’t be eligible for a special enrollment period to enroll in a traditional health plan. This is because short-term insurance plans don’t meet MEC, so losing coverage isn’t a qualifying life event.

Conclusion

Short-term plans may be a convenient option for some individuals if they have a gap in health insurance. But they’re unavailable in some states and don’t have to follow ACA regulations. This can be a critical issue if you have pre-existing conditions and need a certain amount of medical care or want to subsidize your health plan with premium tax credits.

If you’re looking for comprehensive coverage, you have options. Your best bet is to participate in a health benefit offered by your employer or enroll in a traditional health plan on a public or private exchange during open enrollment. This way, you’ll have ACA protections and the best coverage possible for you and your family.

This blog article was originally published on October 11, 2023. It was last updated on June 14, 2024.

1. https://www.healthinsurance.org/blog/finalized-federal-rule-reduces-total-duration-of-short-term-health-plans-to-4-months/#:~:text=How%20will%20state%20regulations%20be%20affected%20by%20the%20rule%3F

2. https://www.whitehouse.gov/briefing-room/statements-releases/2024/03/28/fact-sheet-president-biden-announces-new-landmark-rule-to-protect-americans-from-junk-health-insurance/

3. https://www.talktomira.com/post/how-much-does-short-term-health-insurance-cost