What Is Short-Term Health Insurance? (2024)

What Is Short-Term Health Insurance?

Short-term health insurance is meant to cover your medical bills for a short time, often during a gap in other insurance coverage. However, short-term health insurance does not provide as much coverage as a traditional health insurance plan. Insurers can also charge more and even deny applicants who have pre-existing medical conditions. The duration of these plans has been limited by federal rule-making.

Key Takeaways

People buy short-term insurance to cover gaps between traditional health insurance coverage.
In March 2024, the Biden administration instituted a rule limiting short-term health insurance to four months at most if purchased on or after Sept. 1, 2024.
Short-term insurance is overseen by a mix of federal and state laws, so rules vary widely by state.
Short-term health insurance policies provide much more limited coverage than traditional health insurance. The Biden administration rule requires insurers to more clearly disclose limits on the first page of any insurance documentation.
Applicants can be denied for pre-existing conditions.

How Short-Term Health Insurance Works

Short-term health insurance may also be known as limited-duration health insurance or short-term, limited-duration insurance (STLDI). If your state allows these policies, for now, you can enroll in short-term insurance for a duration of up to 12 months, which can be extended to a maximum of 36 months through renewals.

Note

All policies that begin on Sept. 1, 2024 or later may only last for three months, with a possible one-month extension.

Short-term health insurance plans aren’t defined as “individual health insurance coverage” under the Public Health Service Act. As a result, short-term plans work differently than traditional health insurance coverage. Insurers have more flexibility in how they design the plans. You also don’t benefit from ACA’s federal consumer protections.

Many short-term insurance plan providers offer significant consumer choices regarding coverage and costs. For example, you may be able to choose your own:

Deductible: This is per person per term, such as $2,500 or $12,000
Term coinsurance maximum: The most you pay for covered services after you meet the deductible
Maximum coverage: The most the plan pays for covered services during the term per person
Copay or coinsurance: Your share of the cost for each service
Prescription drug cost: Your share of prescription drug coverage, if available

Changing these variables will change your monthly premium. You may be able to add supplemental benefits, including virtual health care services, vision, dental, and other benefits.

Short-Term Health Insurance vs. Health Insurance

Federal regulations for short-term health insurance primarily only cover how long the plan can last and whether you can renew the plan. Some states have additional rules for short-term insurance benefits, while others don’t.

In contrast, traditional health insurance is highly regulated by federal and state law. Here are some significant ways short-term health insurance differs from traditional insurance.

Availability and Cost

You can buy an Affordable Care Act (ACA) plan on the ACA Health Insurance Marketplace or your state exchange. Buying on one of these websites may allow you to qualify for cost-sharing reductions that lower the cost of your healthcare. Plans can only use your age, area, and smoking status to determine your monthly cost.

In contrast, you must buy a short-term health insurance plan directly from the insurer or a licensed insurance agent. It isn’t available on the ACA Marketplace, and you won’t qualify for federal aid or reductions. Short-term plan premiums aren’t limited to being based only on age, area, and smoking status—the insurer can base your premiums on any number of aspects, including your health.

Policy Length and Renewability

ACA plans typically last one calendar year and are renewable even if you develop health issues.

Maximum Out-of-Pocket Expenses

Traditional health plans typically feature an out-of-pocket maximum or cap on the most you would pay out-of-pocket for health services. For example, the most you’d pay out of pocket on a Marketplace plan is $9,450 for an individual and $18,900 for a family in 2024. Once you hit the maximum, the plan continues to pay for covered care. There’s no limit on how much the traditional health plan will pay for your treatment.

In contrast, short-term health plans have a lifetime maximum the insurer will pay, often between $250,000 and $2 million. This is the total your plan will pay for covered costs. So, if you have a $1 million plan maximum, once your medical bills total $1 million, the plan won’t pay anything else toward your care.

Pre-existing Conditions

Short-term health insurance providers can deny you coverage if you have a pre-existing condition, charge you more because you’ve had a condition, or refuse to pay for specific procedures if the insurer determines you have a pre-existing condition.

In contrast, according to federal law, health insurance cannot deny you coverage or charge you more based on your health history or current health.

Standard Procedure Coverage

Many types of care coverage required in an ACA or group health insurance plan may not be included or available in your short-term health insurance plan.

These include the ACA 10 Essential Health Benefits and other standard benefits such as:

Outpatient care
Maternity and newborn care
Preventive services and wellness
Prescription drug coverage
Lab services
Immunizations

Limits on Treatment of Common Conditions

Whether or not you have a pre-existing condition, an insurer may deny coverage for specific conditions for a period of time, such as the first six months, or for the entire contract. According to a 2020 staff report from the U.S. House of Representatives, these common conditions include:

Kidney disease
Skin disease
Allergy treatment or diagnosis
HIV and AIDS
Organ transplants
Eye surgery
Sleep disorders

The Congressional report found that many short-term plans have waiting periods for covered treatment, even for serious conditions such as cancer or a medical emergency.

Coverage Limits

Even if treatment is covered, plans may impose maximum coverage limits for treatment. For example, some plans limit:

Doctor visits: How often you can visit the doctor or a dollar maximum, such as $500 per policy period.
Daily hospital stays: Dollar limits may range from $500 to $10,000.
Emergency room coverage: Caps on treatment reimbursem*nts could be as low as $250
Surgery: Limits may be placed on the number of surgical procedures that are covered or on the dollar amount covered

Due to these limits, you could be billed by the facility or provider for the remaining amount, which could quickly spiral into medical debt.

Advantages and Disadvantages of Short-Term Health Insurance

Pros

Affordable premiums
Can start next day if necessary
Can cover a short gap
Potentially more provider options

Cons

Potentially higher costs
Limited coverage for services and treatments
Coverage denial or higher rates based on pre-existing conditions
Confusing documentation

Pros Explained

Affordable premiums: Short-term plans offer limited coverage, so their monthly premium costs may be much lower than an ACA plan, particularly if you’re young and healthy.
Can start the next day if necessary: While some ACA or employer health plans may not start until the first day of the next month, you can enroll in a short-term plan that starts the next day.
Can cover a short gap: If you’re stuck without insurance for a brief period, a short-term plan can offer some temporary relief while you wait for another health insurance plan to kick in. It may be better than going without any coverage altogether.
Potentially more provider options: Many short-term plans don’t use provider networks, so you may be able to see any doctor you wish. However, remember that the plan likely will not pay the full amount of your visit.

Cons Explained

Potentially higher costs: If you have high medical bills while on a short-term plan, you could pay more out of pocket due to exclusions, deductibles, and lifetime or treatment limits. Someone choosing a short-term limited duration plan is taking on “additional risk and may spend substantially more for treatment of a condition newly diagnosed while enrolled in an STLD policy compared to an ACA compliant policy,” according to a February 2020 report from Milliman.
Limited coverage for services, and treatments: As noted earlier, many short-term plans place dollar, frequency, or other limits such as exclusions on expected health services and treatments.
Coverage denial or higher rates based on pre-existing conditions: If you have a pre-existing condition, the short-term plan provider may deny you coverage, charge you a higher premium, or exclude your condition from any future treatment.
Confusing documentation: Shopping for a short-term health insurance plan can be very confusing, with plenty of exclusions and fine print. Short-term health insurance plans do not follow set standards like ACA plans.

Note

New Biden-Harris administration rules require insurers to describe service types and cost limits in “easy to understand” language.

History of Short-Term Health Insurance

Regulations and controversy around short-term health insurance have bounced around over the past 20 years or so.

In June 1997, federal regulations restricted short-term health insurance contracts to a maximum of 12 months of coverage. Then, in January 2017, the Obama administration shortened thatmaximum duration to up to three months of coverage.

But in October 2018, the Trump administration’s Department of Health and Human Services increased the short-term maximum duration to up to 12 months. In addition, a short-term plan can be renewed for up to 36 months.

Since the Trump administration’s changes, many states have set limits on plans based on plan design, plan contract length, and options to renew.

The result has been a state-by-state difference in how short-term plans work. In Alabama, a short-term plan can’t last more than 12 months and is renewable for up to 36 months. But in Colorado, a short-term plan can’t last more than six months and cannot be renewed.

In March 2023, the Biden-Harris administration, calling short-term insurance “junk insurance,” instituted the new nationwide rule limiting plan duration to four months max and requiring clearer disclosure of limits.

Choosing a Short-Term Health Insurance Plan

When comparing short-term plans, make sure you understand the following:

Definition and coverage of pre-existing conditions
Does the short-term plan use a provider network, and if so, how much of a doctor’s visit is covered?
What deductible do you have to meet before the plan pays, and do you have enough savings to pay that in full if necessary?
What’s the maximum amount the plan pays per term or lifetime?
Does the plan cover expensive emergency room visits, hospital stays, surgery, or prescription drugs? If so, what are the limitations?
Does the plan cover preventive care, and if so, what type?
Are there exclusions in the policy and is it possible you might need those services?

In most cases, you’ll want to closely read the policy documentation—which may be many pages long. Get help from a consumer advocate or licensed insurance agent to ask more challenging questions.

When comparing pricing, ensure you compare apples-to-apples by looking at plans with the same deductible and maximum benefit amount (such as a $2,500 deductible and $1 million benefit) and overall coverage (such as similar preventive services coverage).

Frequently Asked Questions (FAQs)

What is Short-Term Health Insurance Used For?

Short-term health insurance can be used for various health reasons, which depend on what kind of coverage the plan offers. For example, many plans cover emergency care and hospitalization, but only some cover prescriptions or routine preventive care visits. Few plans offer pregnancy coverage. If you’re pregnant and need coverage, consider Medicaid or an ACA plan.

Is Short-Term Coverage a Good Idea?

Short-term coverage may be helpful in limited situations. For example, if you’re between plans, don’t qualify for a special enrollment period, and know you’ll have traditional health insurance coverage soon, it may be worthwhile. However, read the policy closely to understand what may not be covered. If you’re financially stressed, a Bronze or Catastrophic ACA health plan may offer better coverage at a comparative price—if you qualify for an enrollment period.

How Do I Qualify for Short-Term Health Insurance?

Almost anyone can qualify for short-term health insurance, regardless of income, immigration status, or employment status. However, you may have a more challenging time finding coverage if you have a pre-existing condition or are over age 65 and eligible for Medicare. In addition, you need to live in a state where short-term health insurance is available. In some states, short-term plans don’t meet the state’s requirements for health insurance plans. These states include California, Minnesota, New Jersey, New York, Vermont, and Washington State.

The Bottom Line

Sometimes, a short-term health insurance plan may make sense as a temporary solution. However, you’ll need to seriously investigate any plan’s benefits and drawbacks before enrolling—you may not be buying the coverage you think you’re getting. Research your options; don’t just go with the cheapest plan out of haste or confusion. Get help, if necessary, from a licensed health insurance agent referred by friends or family.

What Is Short-Term Health Insurance? (2024)