Is short-term health insurance a good idea?

Short-term health insurance isn’t a full-coverage health insurance plan — it is a temporary alternative.

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Elissa SuhSenior Editor & Disability Insurance ExpertElissa Suh is a disability insurance expert and a former senior editor at Policygenius, where she also covered wills, trusts, and advance planning. Her work has appeared in MarketWatch, CNBC, PBS, Inverse, The Philadelphia Inquirer, and more.

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Key takeaways

  • Short-term health plans are a form of temporary health insurance. These medical plans are limited to under a year

  • The Affordable Care Act doesn't regulate short-term coverage, so term plans vary on what medical benefits and services they offer

  • Pre-existing conditions are not covered, or covered at a high cost

  • Term health insurance has lower a deductible and premiums than marketplace health insurance plans

Short-term health insurance is an alternative to a traditional health insurance plan. They aren’t regulated by Obamacare so they don’t offer comprehensive benefits — like preventive care or maternity care. While monthly premiums for short-term plans are less than with other health plans, you won’t save money when you get sick because you might have to pay out of pocket for medical expenses.

Short-term plans are meant to be a temporary bridge for individuals and families until they can enroll in a regular health plan. They’re typically sought after by people who need some coverage outside of Open Enrollment, such as when you’re in-between jobs or waiting for Medicare coverage to begin.

Short-term health plans fall under the standard of minimum essential coverage established by the Affordable Care Act. However, as of 2019 the individual mandate has been lifted, so people enrolled in a short-term plan will not have to pay a penalty.

What is short-term health insurance?

If you don’t have employer-sponsored health insurance you might buy a health plan on the marketplace. You can only buy a marketplace plan during Open Enrollment, or during a Special Enrollment period if you have a qualifying life event. If you need insurance coverage right away, you might consider buying a short-term health insurance plan. They’re often cheaper than traditional insurance, because short-term plans cover fewer medical services.

Short-term health insurance and the Affordable Care Act

Short-term plans are not regulated by the Affordable Care Act (ACA). Also known as Obamacare, this health care law was established to make health insurance coverage more affordable and offer people more benefits and protections. Among other things, Obamacare created a marketplace for individuals to buy health insurance on their own — if, for instance, they didn’t have employer-sponsored health insurance.

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Short-term medical plans, however, are not covered under the Affordable Care Act, and therefore are not subject to its rules and standards. This means certain features do not apply.

Essential health benefits

Short-term health insurance is not required to cover the 10 essential health benefits, including prescription drugs, pediatric services, and hospitalization that all ACA plans must provide.

Pre-existing conditions

Health insurance providers cannot deny you coverage or charge you more if you have a pre-existing condition. However, short-term plans will take this into account, making it harder or more expensive for people to find coverage. Learn more about pre-existing conditions.

Tax penalty

Short-term health plans do not meet the minimum essential coverage (MEC) requirement for health insurance. In the past, this meant individuals enrolled in this type of plan had to pay a tax. However, the individual mandate has been lifted, so you can no longer be penalized for not having health insurance in 2019.

How long can you keep short-term health insurance?

The coverage period for short-term plans are blocks of time, or terms, anywhere from one month, to just under a year. (Sometimes short-term plans are referred to as “term health insurance.”) When a short-term plan ends, you reapply for coverage as many times as you want, as long as the total duration of your term coverage doesn't exceed 36 months.

What do short-term health plans cover?

Health benefits offered by short-term coverage vary based on your plan and provider. Prescription drug coverage, preventive care, and maternity care may not be covered by your plan. Mental health services are typically very limited with short-term plans.

However, short-term medical insurance offers more flexibility when it comes to seeing doctors outside of your network, and you generally do not need a referral to see a specialist physician.

How much is short-term health insurance?

Short-term plans typically have a lower deductible and premiums than traditional health insurance plans bought on the marketplace. This is because term health insurance often does not provide all the same medical benefits and services.

(Work-sponsored health plans will always be the more affordable option with lower monthly premiums.)

Should I get short-term health insurance?

If it’s outside of Open Enrollment period and you can’t qualify for a Special Enrollment period, short-term health insurance might fulfill your needs. Since it’s meant to be temporary, it is best for people who are transitioning between health plans. For example, people waiting for Medicare to kick in, someone starting a new job, or a young adult losing parent’s health coverage might seek a short-term plan in the interim.

However, if you have chronic conditions that require frequent medical attention a short-term plan may not offer enough coverage. If you have pre-existing medical conditions, you might not even qualify, or you’ll find that certain services aren’t covered for you.

While term insurance tends to be cheaper, it’s because it doesn’t offer the usual benefits of a health plan. Short-term health insurance coverage is only helpful in case of a major medical event, so make sure to find out in advance what is covered if you decide to seek coverage this way.

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