Short-term health insurance provides temporary medical coverage for people who need immediate protection during gaps in traditional health insurance.
Key Takeaways
- Temporary Coverage: Short-term health insurance plans are now limited to a maximum of 4 months total duration, including renewals.
- Lower Premiums: These plans often cost 50-80% less than traditional health insurance but offer limited coverage.
- No Open Enrollment: You can apply for short-term health insurance any time during the year, unlike ACA marketplace plans.
- Limited Benefits: Plans exclude pre-existing conditions, preventive care, maternity benefits, and mental health services.
- State Restrictions: Not available in 12 states including California, New York, and Massachusetts.
What Is Short-Term Health Insurance?
Short-term health insurance is temporary medical coverage designed to bridge gaps between permanent health insurance plans.
These policies provide basic protection against unexpected medical expenses for a limited time period. Unlike traditional health insurance, short-term plans don’t follow Affordable Care Act (ACA) regulations and offer fewer benefits.
Short-term health insurance plans now have a maximum duration of 4 months total, including any renewals. Under updated federal regulations that took effect September 1, 2024, these plans are limited to an initial 3-month term with one possible 1-month extension.
The primary purpose is protecting you from catastrophic medical bills during transitional periods, not providing comprehensive healthcare coverage.
Who Should Consider Short-Term Health Insurance?
Short-term health insurance works best for specific situations where you need temporary coverage.
Ideal candidates include:
- Recent college graduates waiting for employer benefits to begin
- People between jobs who lost employer-sponsored coverage
- Early retirees not yet eligible for Medicare
- Individuals who missed ACA open enrollment and don’t qualify for special enrollment
- Freelancers or contractors seeking temporary protection
Not suitable for:
- People with pre-existing medical conditions requiring ongoing treatment
- Pregnant women or those planning to become pregnant
- Individuals needing comprehensive mental health or substance abuse coverage
- Anyone seeking long-term, permanent health insurance solutions
Pros and Cons of Short-Term Health Insurance
Advantages
Lower Cost: Short-term health insurance premiums typically cost 50-80% less than comparable ACA marketplace plans. Monthly premiums often range from $100-400 depending on age, location, and coverage level.
Quick Enrollment: Most applications are approved within 24-48 hours. You can get coverage that starts as soon as the next day after approval.
Year-Round Availability: Unlike ACA marketplace plans, you can apply for short-term health insurance any time during the year without waiting for open enrollment.
Flexibility: Choose your coverage duration based on your specific needs and timeline, up to the federal maximum of 4 months.
Disadvantages
Limited Coverage: Short-term plans exclude many essential health benefits required by the ACA, including preventive care, maternity coverage, mental health services, and prescription drug coverage.
Pre-Existing Conditions: These plans don’t cover any pre-existing medical conditions, which are broadly defined and can include common issues like asthma, diabetes, or high blood pressure.
No Cost Sharing: You won’t receive premium tax credits or cost-sharing reductions available with ACA marketplace plans.
Medical Underwriting: Insurers can deny coverage based on your health history and medical questionnaire responses.
Compare Pricing on the Best Insurance Plans Available
How Short-Term Health Insurance Works
Short-term health insurance operates similarly to traditional health insurance with key differences.
Application Process: Complete a medical questionnaire about your health history. Insurers review your answers and approve or deny coverage based on medical underwriting guidelines.
Coverage Structure: Most plans include deductibles ranging from $1,000-10,000, coinsurance rates of 70-80%, and out-of-pocket maximums between $5,000-25,000.
Network Providers: Plans typically use PPO networks allowing you to see any licensed provider, though you’ll pay less for in-network care.
Claims Process: Submit claims directly to the insurance company or use network providers who bill the insurer directly.
State Rules and Regulations
Short-term health insurance availability varies significantly by state.
Prohibited States: Twelve states ban short-term health insurance or have regulations making it effectively unavailable:
- California
- Connecticut
- District of Columbia
- Hawaii
- Maine
- Massachusetts
- New Jersey
- New Mexico
- New York
- Rhode Island
- Vermont
- Washington
Restricted States: Many states limit plan duration or renewal options. For example:
- Delaware caps plans at 3 months
- Maryland limits coverage to 3 months
Federal Guidelines: Under current federal law effective September 1, 2024, short-term plans are limited to a maximum 4-month total duration (3-month initial term plus one 1-month extension).
How to Choose the Right Short-Term Health Insurance Plan
Selecting the best short-term health insurance requires careful evaluation of your needs and circumstances.
Assess Your Timeline: Determine exactly how long you need coverage. With the 4-month maximum, plan accordingly for when permanent coverage will begin.
Compare Costs: Look beyond monthly premiums to understand total potential costs including deductibles, coinsurance, and out-of-pocket maximums.
Review Network Providers: Ensure your preferred doctors and hospitals participate in the plan’s provider network to minimize out-of-pocket costs.
Understand Exclusions: Carefully read what’s not covered, paying special attention to pre-existing condition definitions and excluded services.
Consider Alternatives: Compare short-term insurance with health sharing plans, COBRA continuation coverage, or ACA marketplace options to ensure you’re choosing the best solution.
Health Sharing Plans: An Alternative to Short-Term Insurance
Health sharing plans offer a viable alternative to short-term health insurance for consumers seeking affordable, renewable coverage.
Unlike short-term insurance, health sharing plans operate as non-profit organizations where members share medical expenses. These plans typically cost 50-70% less than traditional health insurance, have no term limits, and don’t exclude pre-existing conditions after waiting periods.
Health sharing plans may be particularly suitable for healthy individuals and families who want long-term affordable coverage without the limitations of short-term insurance. Learn more about health sharing plans.
Coverage Limitations and Exclusions
Short-term health insurance plans have significant coverage limitations you should understand before purchasing.
Pre-Existing Conditions: Any health condition you had before the plan’s effective date won’t be covered. This includes conditions you were unaware of at the time of application.
Essential Health Benefits: Plans don’t cover ACA-required benefits including maternity care, mental health services, substance abuse treatment, prescription drugs, preventive care, or pediatric services.
Annual and Lifetime Limits: Many plans impose dollar caps on benefits, unlike ACA-compliant plans which prohibit benefit limits.
Specific Exclusions: Common exclusions include routine physical exams, vaccinations, birth control, fertility treatments, and cosmetic procedures.
Compare Pricing on the Best HealthShare Plans Available
Conclusion
Short-term health insurance provides valuable temporary protection for people facing coverage gaps, but it’s not a substitute for comprehensive health insurance.
These plans work best for healthy individuals who need short-term coverage during specific transitional periods. The lower premiums come with significant coverage limitations, and recent regulatory changes mean duration options may vary significantly by state.
Before purchasing short-term health insurance, carefully evaluate your health status, coverage needs, timeline, and your state’s current regulations. Consider all available alternatives including health sharing plans, COBRA coverage, or ACA marketplace options.
Ready to explore your health insurance options? Our Personal Benefits Managers can help you compare short-term plans with other coverage alternatives to find the best solution for your situation. Schedule a free consultation today to get personalized guidance on your healthcare coverage needs.
For Further Reading:
Frequently Asked Questions (F.A.Q.)
Q: Can I renew my short-term health insurance plan?
A: Yes, but renewals are very limited. Under current federal law, you can only extend your plan once for a maximum total duration of 4 months (3-month initial term plus one 1-month extension).
Q: Will short-term health insurance cover prescription drugs?
A: Most short-term plans don’t include prescription drug coverage, though some offer limited formularies for an additional cost.
Q: Can I cancel my short-term health insurance plan early?
A: Yes, you can typically cancel anytime, though you may not receive a refund for unused premium payments.
Q: Does short-term health insurance count as minimum essential coverage?
A: No, short-term plans don’t satisfy ACA minimum essential coverage requirements, though there’s currently no federal penalty for lacking coverage.
Q: How quickly can I get short-term health insurance coverage?
A: Most insurers can approve applications and start coverage within 24-48 hours of application submission.
Wiley is President of HSA for America. He believes that consumers should have choice and price transparency, so they can make the best healthcare decisions for their needs. Read more about Wiley on his Bio page.
