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 a plan mid-year if you experience a qualifying life event or become eligible for a federal health insurance program, like Medicare or Medicaid, but these situations may not support every individual.

If you need medical coverage outside of open enrollment, you can consider a short-term health insurance plan. 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 so you can determine if one is the right decision for you and your family.

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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 outside of open enrollment when they lose permanent health coverage. These plans range in length from a few months to a year and offer limited covered services.

While all public exchange health plans must comply with Affordable Care Act (ACA) regulations, like providing minimum essential coverage (MEC), temporary insurance plans don’t have to follow 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 Columbia¹ prohibit the sale of short-term health policies entirely.

The Biden Administration proposed restricting² short-term medical plans to three months with an option to renew coverage for a fourth month. If finalized, the rules would apply only to new plans.

What does a short-term health insurance plan cover?

Most short-term health plans offer coverage to people for 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, and 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 plan type, location, and the insurer. So, review the policy’s coverage, limitations, restrictions, and other plan details before you enroll.

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

Short-term insurance plans are generally a more affordable option than comprehensive medical plans. In many cases, the monthly premium can be less than $200. But prices vary³ based on your location, age, gender, medical history, insurance carrier, and other factors.

Additionally, you can’t use tax subsidies to reduce your premium as short-term policies aren’t sold on the public health insurance exchanges.

Temporary coverage also tends to have high deductibles, coinsurance, and copayments, plus a set maximum limit. These plans may also come with a one-time enrollment fee.

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

Short-term health plans may only work for some individuals. But, there are a few factors that 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 a gap in coverage to have health insurance in case of a medical emergency.
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. Plans may offer coverage for up to a year with the potential for renewal.
8. 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. Plans don’t renew automatically, and not all insurance companies or states allow renewals.
2. They aren’t compliant with the ACA, so they don’t have to cover the ten essential health benefits.
3. You need to disclose your medical history on 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 bill in the mail for whatever 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 is right for 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.
• 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 to enroll in a Marketplace plan.
• You’re generally healthy and don’t need many medical services or prescription drugs.
• 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 not qualify, depending on your 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, insurance agent, or 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 plan at any point throughout the year. Your policy may become active the day after the insurer receives your application, depending on your health status 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.

Under federal rule, insurers can only renew short-term plans twice. This means you could have coverage for three years. However, many states⁴ have plan duration limits and don’t allow renewals. So check your insurer if you need a short-term plan with longer limits and renewability.

Conclusion

Short-term plans may be a convenient option for some individuals if they have gaps in coverage. But they’re unavailable in some states and don’t have to follow ACA regulations. This can especially be an 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 health coverage, 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.

1. https://www.healthinsurance.org/short-term-health-insurance/#:~:text=Short%2Dterm%20health%20insurance%20availability%20in%20your%20state
2. https://www.federalregister.gov/documents/2023/07/12/2023-14238/short-term-limited-duration-insurance-independent-noncoordinated-excepted-benefits-coverage
3. https://www.talktomira.com/post/how-much-does-short-term-health-insurance-cost
4. https://www.healthinsurance.org/so-long-to-limits-on-short-term-plans/#current:~:text=Current%20state%20limits%20on%20duration%20of%20short%2Dterm%20plans