Short-term health insurance became a very real, affordable alternative to the high-priced coverage offered through Affordable Care Act (ACA or Obamacare) on August 1, 2018 when the Trump administration issued a final rule that extended short-term health plans to 12 months and made it possible for insurers to renew the coverage for up to 36 months (three years).
Short-term plans provide cheaper, skinnier coverage than ACA plans.
Background
Prior to 2017, short-term health insurance plans were offered as 6 to 12-month policies and typically used by people who needed temporarily health coverage because they were out of work, or in a transition.
In 2016, the Obama administration started to worry that healthy people were buying these policies instead of Obamacare plans, because they were so much cheaper. Their concern was that healthy people would stop buying Obamacare plans and start to buy affordable short-term plans, which would drive up costs in Obamacare’s risk pools
So, in 2016,Obama administration placed a 90-day limit on the duration of short-term health insurance plans.

What was the impact of the 90-day limitation on short-term health insurance plans?
By all accounts, the 90-day limit had a limited impact on the popularity of short-term health coverage. The 90-day policy went into effect January 1, 2017.
For the whole of 2017, enrollments in short-term health insurance plans increased 47% while enrollments in Obamacare continued to decrease.
In other words, theres little evidence that the 90-day limitation on short-term health insurance plans had any impact on reducing their popularity.
August 1, 2018 Rule Change
On August 1, 2019 the 90-day rule was reversed. Effective October 1, 2018, short-term health insurance will be available to consumers for up to 12 months, in most states at eHealthInsurance.com (eHealth.com)
Why is Short-Term Health Insurance Coverage So Popular?
eHealth.com is a marketplace for Obamacare plans and short-term plans. We published a comparison of monthly premiums for the lowest cost short-term health plan and the lowest cost Obamacare plans available at eHealth.com, Healthcare.gov or CoveredCa.com in 40 metropolitan areas.

Here is what the data shows:

• 1/5 the cost: Short-term health insurance plans cost about 1/5 the cost of Obamacare plans, without a subsidy. ($116 vs. $862 per month for a family of 3.)
• 1/3 the cost for low-income families: Even for low-income families who get Obamacare subsidies, short-term health insurance plans are 1/3 of the cost of an Obamacare plan. ($116 vs. $297 per month for a family of 3.)
• 2% of median income vs. 18% of median income: Obamacare’s definition of affordable health insurance is insurance that costs less than 8% of household income.
  • Median income in the US is $56,516
  • The cheapest Obamacare plans costs 18% of median household income.
  • The cheapest short-term plans costs 2% of median household income.

How much does short-term health insurance cost in…

• San Francisco, CA? Short-term health insurance is one-half the cost of Obamacare. ($372 for short-term vs. $833 for Obamacare.)
• Beverly Hills, CA? Short-term health insurance is one-half the cost of Obamacare. ($372 for short-term vs. $640 for Obamacare.)
• Portland Or? Short-term health insurance is one-tenth the cost of Obamacare. ($99 for short-term vs. $613 for Obamacare.)
• Chicago, Il? Short-term health insurance is one-tenth the cost of Obamacare. ($116 for short-term vs. $933 for Obamacare.)

 


What would consumers do without access to affordable short-term health insurance plans?

• 51% would have no health insurance: 51% of people enrolled in these plans say they’d be uninsured if short-term insurance were illegal.
• 22% would look for something else: Another 22% of people enrolled in these plans say they’d look for something else, other than Obamacare, if short-term insurance were not available.

Want more information about short-term health insurance?

• Short-term health insurance versus Obamacare health insurance (link.)
• What is major medical health insurance? (link)