Americans shopping for coverage during the open enrollment gap keep landing on short-term health insurance, a product that looks like a bargain until the first hospital bill arrives.
These plans can cost a fraction of an ACA marketplace policy, and they are legal in most states.
The catch is buried in the fine print: they are not required to cover pre-existing conditions, maternity care, mental health, or prescription drugs.
A recent investigation found that roughly 3 in 4 short-term plan enrollees who reported a denied claim said they had no idea their policy excluded the service.
In one case, a Texas family paid $312 a month for a plan that looked comprehensive on the website.
When the father needed emergency gallbladder surgery, the insurer covered $2,100 of a $42,000 bill.
The appeal of these plans is simple math.
A benchmark ACA silver plan for a 40-year-old can run $450 to $600 a month before subsidies, while a short-term policy might quote $180.
For gig workers, early retirees, and people between jobs, that gap feels like relief.
But the lower premium often buys a cap on total benefits, sometimes as low as $250,000 or even $100,000 per year.
One ambulance ride and a two-night hospital stay can burn through that in days.
Short-term plans were originally limited to three months under federal rules, but a 2018 change stretched them to just under 12 months, and some states allow stacking renewals for up to three years.
Insurers can re-underwrite you at each renewal, meaning a new diagnosis can make you ineligible or spike your rate.
You are not guaranteed coverage from one term to the next.
A 2023 KFF analysis found that among adults with short-term plans who had medical debt, the median amount was $3,200, and many put expenses on cards at 22% to 29% APR.
A $5,000 hospital charge on a card at 26% interest, paid at $200 a month, takes nearly three years and costs over $1,900 in interest alone.
So what should you do if you are staring at a coverage gap?
First, check whether you qualify for a special enrollment period on Healthcare.gov, which is triggered by losing job-based coverage, moving, or income changes.
Second, look at ACA subsidies, which often make a bronze or silver plan cheaper than the sticker price suggests.
Third, if you do buy short-term coverage, read the exclusions page, not the brochure, and confirm the maximum benefit and whether prescriptions are covered before you enroll.
Some states have banned or restricted short-term plans, including California, New York, and Massachusetts, so rules vary widely depending on your zip code.
Our take: short-term insurance is a bridge, not a safety net, and it works best for healthy people who need a few months of catastrophic-only protection.
If you have any ongoing condition or take regular medication, the math usually flips against you fast.
Final Thoughts
Spend an afternoon comparing a subsidized marketplace plan before you hand over a card.