Short-term health insurance is having a moment.
With monthly premiums on Affordable Care Act marketplace plans still climbing in many states, shoppers are getting hit with ads promising coverage for $50 or $80 a month.
It sounds like a lifeline for anyone paying $400 or more for a traditional plan.
Here's the catch: short-term plans are not ACA-compliant.
They can reject you for pre-existing conditions, charge women more than men, cap how much they'll pay out per year, and skip entire categories of care, including maternity, mental health, and prescription drugs.
In other words, they're cheaper because they cover less.
The plans are legal in most states, but the rules vary.
Some states, including California, New York, and Massachusetts, effectively ban them or limit them to three months.
Others let you keep renewing for up to 36 months.
That patchwork means the same plan can be a three-month stopgap in one state and a multi-year trap in another.
People in a genuine gap: waiting for a new job's coverage to start, between school and a first paycheck, or priced out of a marketplace plan by a few hundred dollars a month.
For a healthy 28-year-old with savings set aside for a surprise bill, a short-term plan can bridge a few months without wrecking the budget.
Anyone with a chronic condition, a prescription they need refilled, or a family history that turns into a diagnosis mid-policy.
A 2020 study in Health Affairs found that short-term plans paid out a far smaller share of premiums in medical claims than ACA plans did — roughly 50 cents on the dollar versus around 80 cents.
Before you click "enroll" on one of these ads, do three things.
First, read the exclusions page, not the marketing page.
Second, check whether your doctors and hospitals are in network — many aren't.
Third, price a marketplace plan with subsidies.
If your income qualifies, a bronze ACA plan may cost less than you think, and it can't turn you away for being sick.
If you do buy short-term coverage, treat it like a parachute, not a home.
Set a calendar reminder for the end date, and start shopping for real coverage at least a month before it expires.
Automatic renewals are how people end up paying for a year of coverage they thought was temporary.
One more thing worth knowing: if you let a short-term plan lapse and then try to buy an ACA plan outside open enrollment, you may need a qualifying life event to get in.
Losing short-term coverage usually doesn't count.
That gap can leave you uninsured for months, which is the exact scenario you were trying to avoid. **The bottom line:** A cheap premium is not the same as cheap care.
Short-term plans can be a smart three-month bridge for healthy people with cash on hand, but they're a bad substitute for real insurance if anyone in your household takes medication, sees a specialist, or could get pregnant.
Final Thoughts
Read the exclusions before the sales page, and run the numbers on a subsidized marketplace plan first — the "expensive" option is sometimes the cheaper one.