Short-Term Health Insurance
The “Better Than Nothing” Plan for Gaps in Coverage
My friend quit her job to travel for three months before starting a new one. She needed temporary health insurance. She bought a short-term health insurance plan online. It was very cheap, about $80 a month. The plan was designed to cover her for a catastrophic accident or a sudden, unexpected illness during her travels. She understood it was not a comprehensive ACA plan—it wouldn’t cover her pre-existing allergy treatments or preventive care. It was a simple, temporary safety net to protect her from a major medical bill during her coverage gap.
Need Health Insurance Fast? The Truth About Short-Term Plans
Quick Coverage with Major Caveats
When I left my job, I had a 60-day waiting period before my new company’s health insurance kicked in. I needed coverage fast. I was able to get a short-term health plan approved in less than 24 hours. The premium was low, and it gave me some peace of mind. However, I had to be aware of the trade-offs. The plan had a high deductible, it didn’t cover my pre-existing back issue, and it offered no coverage for preventive care. It was a quick fix, but a very limited one.
Why My “Cheap” Short-Term Health Insurance Cost Me $50k
A Cautionary Tale of Skimpy Coverage
A guy I know bought a cheap short-term health plan to save money. A few months later, he was diagnosed with cancer. He was horrified to learn that his short-term plan did not cover cancer treatments, which it considered a pre-existing condition that manifested during the policy term. He was left with over $50,000 in medical bills. His story is a stark warning: short-term health insurance is cheap because it provides very little actual coverage. It is not a substitute for a comprehensive, ACA-compliant health plan.
Short-Term Health Insurance: Bridging Gaps or Financial Disaster Waiting to Happen?
A Tool for a Very Specific, Temporary Need
A short-term plan can be a useful bridge. For example, if you are 25 and just fell off your parents’ health plan and are waiting for your new job’s insurance to start in 45 days, it can be a good fit. It provides a basic safety net against a major accident during that short gap. However, if you try to use it as your primary health insurance for a year or more, you are setting yourself up for a potential financial disaster. The first time you need it for a serious illness, you will likely discover it doesn’t cover your condition.
Does Short-Term Health Insurance Cover Pre-Existing Conditions? NO!
The Most Important Exclusion to Understand
This is the single biggest difference between a short-term plan and an ACA-compliant plan. Short-term health insurance does not cover pre-existing conditions. In fact, they can deny your application based on your health history. If you have a condition like diabetes, asthma, or a history of heart disease, you will likely be denied or the policy will exclude any treatment related to that condition. These plans are designed for healthy people to cover new, unexpected illnesses or injuries only.
Understanding the Limited Duration of Short-Term Health Plans (And Renewals)
It’s Called “Short-Term” for a Reason
A short-term health insurance policy is, by definition, temporary. The maximum duration of a single policy term can vary by state, but it is often limited to just a few months, up to a maximum of just under one year. While some plans may allow you to re-apply for a new short-term policy when your current one ends, this is a new application. You will have to go through medical underwriting again, and any condition that developed during your first term would now be considered a pre-existing condition for the new one.
What Short-Term Health Insurance DOESN’T Cover (Maternity, Mental Health, Rx Often Excluded)
The Gaps in the Safety Net are Huge
Short-term health plans are cheap because they exclude many of the essential health benefits that ACA plans are required to cover. Most short-term plans provide no coverage for maternity care, mental health services, or substance abuse treatment. Prescription drug coverage is often very limited or non-existent. They are stripped-down, “catastrophic-only” plans that leave you completely exposed for many of the most common and important healthcare needs. You must read the exclusions list carefully before buying.
Short-Term vs. ACA Plans: Why Cheaper Isn’t Always Better
A Tale of Two Policies
Imagine two safety nets. The ACA plan is a robust, tightly woven net that will catch you if you fall. It costs more, but it’s guaranteed to work. The short-term plan is a cheap, flimsy net with huge holes in it. It might catch you if you fall in just the right way, but it’s far more likely that you’ll fall right through one of the holes (the exclusions). The low premium of a short-term plan is tempting, but the risk of it failing you when you need it most is why an ACA plan is almost always the smarter choice.
When Might Short-Term Health Insurance Be Your ONLY Option?
A Very Narrow Use Case
There are very few situations where a short-term plan is the only option. One might be for a new immigrant who is in a waiting period before they are eligible to enroll in an ACA marketplace plan. Another might be for someone who missed the ACA Open Enrollment window and does not have a Qualifying Life Event, leaving them with a gap in coverage until the next enrollment period. In these very specific, temporary situations, a short-term plan can serve as a last-resort safety net.
Reading the Fine Print: Exclusions and Limitations in Short-Term Policies
The “Gotcha” List Can Be Long
When you look at a short-term health insurance policy, the most important section to read is the list of “Exclusions and Limitations.” This is where you will find out what the policy doesn’t cover. You will likely see exclusions for pre-existing conditions, specific diseases, mental health, maternity, and prescription drugs. The list can be long and comprehensive. It is not an exaggeration to say that these policies are designed to cover a very narrow range of potential events, and to exclude almost everything else.
Can You Be Denied Short-Term Health Insurance? Yes (Based on Health)
It’s Not Guaranteed Coverage
Unlike ACA plans, which are “guaranteed issue,” short-term health insurance plans are medically underwritten. When you apply, you will have to answer a series of health questions. If you have a history of serious medical conditions like cancer, heart disease, or diabetes, your application will almost certainly be denied. These plans are designed for and marketed to healthy people who are unlikely to file a claim. If you have any significant health history, you will likely not be able to get this type of coverage.
How Much Does Short-Term Health Insurance Really Cost?
Cheap Premiums, But Potentially Unlimited Out-of-Pocket Costs
The monthly premium for a short-term health plan can be very low, sometimes less than $100 a month. However, the “cost” is not just the premium. These plans often have very high deductibles, and, most importantly, they do not have an annual out-of-pocket maximum as required by the ACA. This means that even for a covered condition, your share of the costs could be enormous. A cheap premium could be the gateway to a financially devastating medical bill if you have a serious accident or illness.
Filing a Claim on a Short-Term Health Plan: The Underwriting Catch
The Danger of Post-Claim Underwriting
A dangerous practice with some short-term plans is “post-claim underwriting.” This means the insurance company does very little underwriting when you buy the policy. But when you file your first major claim, they will then do a deep dive into your entire medical history to see if they can find any evidence that your current condition is related to a pre-existing condition, giving them a reason to deny the claim. This is why so many claims on these plans are denied, leaving the policyholder with unexpected bills.
Using Short-Term Plans While Waiting for Employer Coverage to Start
The Most Common and Appropriate Use Case
This is the scenario where a short-term plan makes the most sense. You’ve just started a new job, but the company’s health insurance doesn’t kick in for 30, 60, or even 90 days. You have a temporary gap in your coverage. Buying a one- or two-month short-term health plan is a reasonable and cost-effective way to protect yourself from a catastrophic accident or a sudden, acute illness (like appendicitis) during that specific waiting period. It’s a temporary bridge to get you to your real, comprehensive coverage.
Short-Term Plans for Recent Graduates or Job Changers
A Temporary Solution for a Life in Transition
A short-term health plan can be a viable, temporary solution for a young person in transition. For example, a recent college graduate who has aged off their parents’ plan and is still looking for their first full-time job might use a short-term plan for a few months. Similarly, someone who has quit their job to travel or to start a new business might use a short-term plan as a stopgap measure. The key is to see it as a temporary patch, not a long-term healthcare strategy.
Are Short-Term Health Plans Legal? (State Regulations Vary)
A Patchwork of Rules Across the Country
The legality and regulation of short-term health insurance plans are a patchwork that varies from state to state. Some states have banned them entirely. Other states have implemented strict rules that limit their duration to just three months. And some states follow the more lenient federal guidelines, which allow for longer durations. You must check your specific state’s department of insurance website to understand the rules and limitations for short-term plans where you live.
My Experience Researching Short-Term Health Insurance Options
A World of Red Flags and Fine Print
I once helped a friend shop for a short-term plan. The online search results were full of aggressive ads and lead generation sites. The premiums looked incredibly cheap. But when we started reading the “brochure” documents, the red flags were everywhere. We saw long lists of exclusions, high deductibles, and confusing definitions. It became clear that these plans were designed to provide the illusion of coverage while minimizing the insurer’s actual risk. It was a very eye-opening and concerning experience.
Why Financial Experts Warn Against Relying on Short-Term Plans
A Recipe for Financial Ruin
Most financial advisors and consumer advocates strongly caution against using short-term health insurance as a primary form of coverage. The plans are simply too risky. They don’t cover pre-existing conditions, they exclude many essential benefits, and they lack an out-of-pocket maximum. Relying on one of these plans is a gamble that you will not get seriously sick or injured. If you lose that gamble, you could face medical bankruptcy. The potential for financial ruin is why experts almost universally recommend a comprehensive, ACA-compliant plan instead.
Alternatives to Short-Term Health Insurance (COBRA, ACA Special Enrollment)
Better, More Comprehensive Options
If you have a gap in coverage, there are almost always better options than a short-term plan. If you are leaving a job, you have the right to continue your employer’s plan for up to 18 months through COBRA. While expensive, it provides excellent, continuous coverage. Losing your job also triggers a Special Enrollment Period on the ACA marketplace, allowing you to buy a comprehensive plan, possibly with subsidies. These options are far superior because they cover pre-existing conditions and essential benefits, providing real financial protection.
Does Short-Term Health Insurance Meet Mandates (Where Applicable)? No.
It’s Not Considered “Minimum Essential Coverage”
A short-term health insurance plan does not meet the definition of “minimum essential coverage” under the Affordable Care Act. This means that in states that have their own individual health insurance mandate and associated tax penalty (like California or Massachusetts), having a short-term plan will not satisfy that requirement. You would still be considered uninsured under state law and would have to pay the state tax penalty.
Short-Term Health Insurance: Buyer Beware – Know the Risks!
The Final Word
Short-term health insurance can seem like an attractive, low-cost solution, but it is fraught with risk. It’s a product that should be approached with extreme caution. It does not cover pre-existing conditions, excludes many essential benefits like maternity and mental health, and does not have a cap on your out-of-pocket spending. While it may serve as a temporary bridge for a very short, specific gap in coverage for a healthy person, it is never a substitute for a comprehensive, ACA-compliant health plan. The motto for these plans should always be: buyer, beware.