If you want to understand short-term health insurance and how it works, a great place to start is with our eBook, 3 Steps to Understanding Short-Term Health Insurance.  A short-term health insurance plan provides limited, but affordable benefits when compared to a major medical plan that meets all of the benefit requirements of the Affordable Care Act (ACA).  

When it comes to health insurance, people have more options than ever. Short-term medical policies and Affordable Care Act (ACA) compliant individual/family policies are the most popular choices among people who purchase individual health insurance coverage. 

Some attractive features of short-term health insurance

Short-term policies have very affordable premiums that can cost substantially less, sometimes even half of what is charged for an unsubsidized ACA health plan. If you can’t afford ACA health insurance temporarily, a short-term policy may provide some protection against high medical costs and at a reasonable rate. But before you decide you can’t afford ACA health insurance be sure to check if you would be eligible for premium subsidies and cost sharing reductions that apply only to ACA plans sold on the federal or state marketplace. 

Short-term health insurance is accepted by most healthcare providers, including physicians, hospitals, and other health centers. Application for short-term insurance can occur any time during the year. Enrollment is not contingent upon signing up during a short window of fewer than 3 months per year or a qualifying life event, as ACA-compliant individual health insurance is. 

Depending on where you live, you may be able stay on a short-term policy for up to 36 months by renewing it. 

Short-term health insurance provides coverage for emergency care. Most short-term health plans are designed primarily to provide you with coverage and protection from unexpected injuries and illnesses that require emergency medical care.

Short-term health insurance coverage begins and ends quickly. In some instances you may have coverage within 24 hours of the insurer’s decision to accept your application. And if you pay a monthly premium, your coverage can end when you stop making your premium payment. 

Short-term insurance satisfies many non-government requirements for insurance – If you need to verify that you have health insurance for travel, or in order to get admitted to certain types of schools, like nursing or dental schools, short-term plans often satisfy those coverage requirements.

Notable limitations and restrictions of short-term health insurance

Unlike ACA health insurance, pre-existing conditions and health status are considered part of the short-term insurance application approval process and applicants can be denied coverage.

Depending on where you live, short-term health insurance may not be available. Eight states have no short-term health options. The states without short-term health insurance are Massachusetts, North Dakota, New Hampshire, New Jersey, New York, Rhode Island and Vermont. 

Short-term insurance doesn’t provide coverage of pre-existing medical conditions. Other benefits, like maternity coverage, are excluded. Benefits for mental health and substance use care may be excluded from some short-term plans. Also short-term insurance has significant coverage restrictions for prescription drugs, if they’re covered at all.

Short-term insurance often has annual and lifetime maximums on benefits; when you reach this maximum dollar amount, you pay 100% of charges on future related care.  

Although the Affordable Care Act Shared Responsibility Tax is no longer in place at a federal level, 5 states –California, Massachusetts, New Jersey, Rhode Island, Vermont – and the District of Columbia have individual state mandates that residents have health insurance coverage. Short-term insurance plans may not satisfy the state requirements and subject the enrollee to potential penalties. If you live in one of these areas, check your state requirements for health insurance coverage.

Comparative pros and cons of ACA individual/family health plans

The most significant positive features of ACA health insurance include the following:

• Many people are able to qualify for cost-share reductions and premium subsidies when they purchase Silver plans on the marketplace. These government subsidies can lower their monthly premiums substantially (sometimes as low as $0) and their out-of-pocket expenses related to deductibles, coinsurance, and copayments. 
• There is no review of applicant’s health status or pre-existing conditions;  applicants can’t be denied coverage based on their health status.
• ACA plans cover 10 essential benefits including mental health and maternity.
• ACA plans have robust prescription drug benefits, including coverage of many generic, brand name, and specialty drugs.
• ACA plans are available in all states and are easy to compare because of the uniform classification according to metallic tiers – bronze, silver, gold, and platinum.
• ACA plans provide benefit coverage for a calendar year, and may be renewed automatically as long as the plan is still offered or changed for another plan. 

Notable ACA plan restrictions are as follows. 

• ACA plans are often expensive without premium subsidies. 
• ACA plans often have very high deductibles.
• Many plans limit enrollees to a narrow network of healthcare providers.
• In many geographic areas, especially rural counties, Obamacare includes only one insurer.
• A person cannot enroll in an ACA plan outside of the annual Open Enrollment Period without a qualifying life event (e.g. moving to a new state, getting married).

A brief comparative summary appears in the chart below.

Length of time for short-term health insurance coverage

Federal regulations issued in October 2016 limited short-term policy durations to three-month terms without renewal. This limitation was imposed due to concerns that short-term insurance was being used as a less expensive replacement for traditional major medical health coverage although it did not have the consumer protections or comprehensive coverage of ACA medical insurance plans. In 2018, revised federal regulations lengthened the permissible maximum duration of these plans from three months to 364 days with an option to renew for a total coverage period of up to three years.

According to the National Association of Insurance Commissioners, as of January 2020, 12 states had passed legislation to disallow health status underwriting for short-term insurance policies, effectively banning their sale.  Thirteen states and the District of Columbia enacted the same 3 month limit that was previously part of federal regulation. The other 25 states have not placed new restrictions on the sale or terms of short-term health insurance, so the policies’ maximum duration is 365 days with the option of renewals for a total period of 36 months (3 years). For state-specific information, see our article, Trumpcare 2019

Frequently Asked Questions about Short Term Health Insurance

QUESTION: “How long is short-term health insurance coverage?”

ANSWER: The coverage period can range from 30 to 364 days with renewals up to a cumulative 3 years, depending on your state of residence and the plan you choose.

QUESTION: “I thought I had to experience some kind of qualifying life event before I could enroll in a traditional “Major medical” health insurance plan. Am I wrong?”

ANSWER: Most of the year you’ll need to experience a qualifying life event (such as marriage, the birth of a child, moving to a new city, or loss of minimum essential coverage.) before you can enroll in a major medical health insurance plan. During the Affordable Care Act’s nationwide open enrollment period, you can enroll in any major medical health insurance plan you want, without fear of being turned away.

QUESTION: “Can’t I just keep buying short-term coverage indefinitely? Why should I switch to a traditional individual or family plan?”

ANSWER: Most short-term plans limit your coverage to a maximum of 12 months at a time, or less, depending on state regulations where the plan is sold. And similarly, most short-term health insurance companies will limit how many times you can repurchase coverage in a row. It’s possible to be declined based on your medical history, so if you get sick and then need to re-apply for coverage under a new short-term plan, you may be turned down. You’ll also miss out on the richer benefits provided by major medical health insurance plans that meet the ACA requirements. Don’t treat short-term coverage like a long-term solution. It’s not.

QUESTION: “What if I can’t afford a major medical health insurance plan?”

ANSWER: Depending on your income, you may qualify for government subsidies to help make your monthly premiums more affordable. If you’re age thirty or younger you may also be able to choose a “catastrophic” plan which will also meet the coverage requirements under the law. These often have less expensive than typical “bronze,” “silver,” “gold,” or “platinum” plans. With income above 400% of poverty, you may qualify for an exemption. 

QUESTION: “I don’t know where to start when it comes to shopping for health insurance. Where can I find help?”

ANSWER: You can compare health insurance options anytime in the convenience of your home. Simply visit our Individual and Family Health Insurance page and use the eHealth search tool to view your health coverage options.  eHealth can help you understand your coverage options, provide you with quotes from competing insurers, and help you find the plan best suited to your personal needs and budget.

Resources

Average Marketplace Premiums by Metal Tier, 2018-2022. Kaiser Family Foundation (KFF). At https://www.kff.org/health-reform/state-indicator/average-marketplace-premiums-by-metal-tier/?currentTimeframe=0&selectedRows=%7B%22wrapups%22:%7B%22unitedstates%22:%7B%7D%7D%7D&sortModel=%7B%22colId%22:%22Location%22,%22sort%22:%22asc%22%7D

Short-term limited duration health plans. National Association of Insurance Commissioners (NAIC). April 17, 2020. At https://content.naic.org/cipr-topics/short-term-limited-duration-health-plans