If you've priced health coverage lately, you've probably seen the ads.
Short-term health insurance plans promising premiums of $80 or $100 a month, sometimes less than a third of what an Affordable Care Act marketplace plan costs.
For anyone between jobs, freelancing, or staring down a $700 monthly premium, that gap is hard to ignore.
Short-term health insurance is a type of policy designed to cover you for a limited window, typically anywhere from 30 days to just under 12 months, depending on your state.
It was originally meant as a bridge for people temporarily between coverage.
Federal rules expanded the maximum duration to 364 days, and some insurers can renew the policy for up to 36 months total.
Roughly a dozen states, including California, New York, and Massachusetts, have banned or heavily restricted these plans.
Short-term plans generally don't have to cover pre-existing conditions, and many will deny you outright if you have one.
They often skip the ten essential health benefits that ACA plans must include, which means no guaranteed coverage for prescription drugs, maternity care, mental health treatment, or preventive care.
Some cap how much they'll pay out per year or per condition.
A 2020 study in the journal Health Affairs found that short-term plans rejected about one in three claims from people who actually used significant medical care, compared with a roughly 1 percent denial rate for ACA marketplace plans.
Other research has found that people enrolled in these plans were far more likely to receive surprise bills for services they assumed were covered.
If you get sick while on a short-term plan, the insurer can decline to renew you when the term ends, precisely when you most need coverage.
With an ACA plan, you can't be dropped or charged more because you got sick.
None of this means short-term plans are useless.
If you're healthy, between jobs for a few months, and mainly want protection against a catastrophic accident, a short-term plan can be a reasonable stopgap.
The key is knowing what you're buying before you need it.
Before signing up, read the exclusions list, not the marketing page.
Check whether prescriptions are covered and at what limit.
Ask what happens if you need to renew after a diagnosis.
And compare against a marketplace plan with subsidies, because many people qualify for tax credits that bring ACA premiums down more than they expect.
If you're in a special enrollment period, losing job-based coverage, or moving, you may qualify for marketplace subsidies even outside open enrollment.
That's worth checking before defaulting to the cheapest sticker price. **Our take:** Short-term health insurance isn't a scam, but it isn't a substitute for real coverage either.
Treat it as a temporary safety net for a healthy person, not a long-term solution, and never skip reading the exclusions.
Final Thoughts
The monthly savings can evaporate with a single hospital visit.