Losing your ACA subsidy? Read this before you consider a short-term medical plan

Enhanced ACA premium tax credits (the “boosted” subsidies first expanded in 2021) are scheduled to expire at the end of 2025 unless Congress acts. Independent analyses project that premiums for many Marketplace enrollees would more than double on average without those enhanced subsidies. 

When budgets get squeezed, some consumers look at Short-Term Medical (STM) plans as a lower-premium bridge. These can be useful in narrow situations — but they are not ACA-compliant major medical coverage and come with important trade-offs.

Short-term medical plans: what they cover and what they leave out

Short-term medical (STM) plans are temporary, medically underwritten policies meant to bridge brief gaps in coverage, like the stretch between jobs. They’ve always lived on a policy seesaw, and the last few years have been especially wobbly.

In September 2024, a federal rule tightened the leash: new STM policies could last only three months with a single one-month renewal, maxing out at four months total. The rule also required bold, unavoidable consumer warnings.

By August 2025, federal agencies signaled they weren’t prioritizing enforcement while they rethink the entire framework. States were encouraged to set their own course, which means STM availability and rules now vary widely depending on where you live.

How STM plans differ from ACA coverage

Short-term plans operate under a completely different rulebook from ACA-compliant health insurance. The biggest gaps include:

• Medical underwriting. Insurers can deny you, charge you more, or exclude pre-existing conditions.
• Limited benefits. Key services required under the ACA – like mental health care, maternity care, and many prescription drugs – may be missing.
• Restricted consumer protections. They aren’t “minimum essential coverage,” so losing STM coverage doesn’t open a Special Enrollment Period. They also don’t have the same billing and surprise-bill protections ACA plans carry.
• Benefit caps. Some STM plans set annual or lifetime dollar limits.

If ACA plans are built like a reliable full-frame house, STM plans are more like a tent: helpful for a short stretch, but not something designed for long-term shelter.

Where STM is available (and where it isn’t)

Availability and duration limits are heavily state-specific. In at least a dozen states and DC — including CA, NY, NJ, MA, WA — STM plans are banned or effectively unavailable; other states allow them with varying term limits. Always check your state DOI or a licensed broker for what’s currently offered where you live. 

When an STM plan might make sense

Short-term medical coverage is a niche tool, not a safety net. It’s worth considering only when all of these conditions fit your situation:

• You’re in good health and confident you can pass medical underwriting without exclusions that gut the coverage.
• Your coverage gap is brief and predictable, such as waiting a couple of months for new employer benefits to begin.
• You understand the limits of STM plans and are prepared to absorb the financial risk if something major isn’t covered.
• You don’t qualify for other comprehensive options, including ACA marketplace plans, Medicaid, COBRA, or employer coverage.

If one of these doesn’t apply, you’re usually better off with a more robust option.

When an STM plan is usually the wrong tool

Short-term medical plans fall apart quickly if you need anything beyond basic, temporary coverage. They’re generally a poor fit when:

• You have an ongoing condition, are pregnant, or expect upcoming tests, procedures, or brand-name prescriptions.
• You need stable, long-term coverage or guaranteed renewability.
• You want the full set of ACA protections, including coverage for pre-existing conditions, essential health benefits, capped out-of-pocket costs, and surprise-billing safeguards.

If you need predictability or have any medical complexity, STM plans rarely deliver the protection you’re looking for.

Better options to explore before choosing an STM plan

Short-term medical coverage should be a last resort. Before you commit, take a look at these alternatives that offer stronger protections and more predictable costs:

• ACA Marketplace coverage. Whether you get a subsidy or pay full price, Marketplace plans provide comprehensive benefits and consumer protections. Open Enrollment for 2026 runs Nov 1, 2025 through Jan 15, 2026 in most states, with Jan 1 coverage available if you enroll by Dec 15.
• Special Enrollment Period (SEP). Many life changes open a 60-day window to buy ACA coverage, including losing minimum essential coverage (like an employer plan), moving, getting married, or having a baby. Losing STM coverage does not qualify because STM isn’t MEC.
• Medicaid or CHIP. A shift in income or household size may make you eligible at any time of year.
• Employer-based options. A new job with benefits, COBRA, or employer-funded reimbursement programs like ICHRA or QSEHRA can give you access to full ACA plans using pre-tax dollars.
• Catastrophic ACA plans. If you’re under 30 or qualify for a hardship exemption, these plans offer lower premiums while still meeting all ACA requirements.

Exploring these paths first can save you from the financial blind spots that come with short-term medical plans.

If STM is still your best temporary bridge, run through this checklist

Short-term medical coverage can work in narrow situations, but only if you go in with eyes wide open. Before you buy, make sure you’ve checked all of the following:

• Understand your state’s current rules. Confirm the allowed term length and renewal limits. Ask whether the insurer is following the 2024 federal four-month cap or offering longer terms under the current enforcement pause. Keep in mind that rules can shift mid-year.
• Review underwriting and exclusions. Get a written list of any pre-existing condition exclusions or riders added to your policy so you know exactly what isn’t covered.
• Identify major coverage gaps. Look closely at prescription drugs, mental health care, maternity care, and preventive services. Many STM plans cover little or none of these.
• Check for dollar limits. Ask whether the plan caps benefits annually, over a lifetime, or per service.
• Confirm networks and billing rules. See which providers are in network and whether out-of-network charges can be balance-billed, since STM plans don’t usually fall under No Surprises Act protections.
• Plan your transition. Time your STM policy so it ends when new employer coverage or ACA Marketplace coverage begins. Ending STM will not trigger a Special Enrollment Period.
• Read the required disclosures. Review the federal STM notice closely. It’s designed to spell out limitations compared with ACA coverage.

This checklist helps you avoid the hidden traps that can turn STM plans into expensive surprises.

What about fixed indemnity, critical illness, or health care sharing instead?

Other plans often show up in the same aisle as STM coverage, but they serve totally different purposes. Think of them as add-ons, not full replacements. Here’s how each one works.

• Fixed indemnity. Pays a flat cash amount per service, no matter what the care actually costs. If the plan pays $150 for an X-ray but the bill is $1,200, you’re responsible for the rest. It’s designed to supplement real insurance, not replace it.
• Critical illness. Provides a lump-sum payout only if you’re diagnosed with a specific covered condition, like cancer or a heart attack. It doesn’t cover routine care, prescriptions, or ongoing treatment needs.
• Health care sharing. These programs aren’t insurance. Members voluntarily share expenses, payments aren’t guaranteed, and they don’t have to follow ACA rules or consumer protections. Claims can be denied for any number of reasons.

All three can play a supporting role, but none offer the full benefits or safeguards of ACA-compliant coverage.

How many people use STM?

Data are limited, but federal rulemaking points to NAIC and CBO estimates showing that hundreds of thousands of people have used STM coverage at various points, with upper estimates reaching roughly 1 to 1.5 million before enhanced ACA subsidies took effect. Enrollment tended to rise when ACA coverage felt out of reach and then dropped as subsidies expanded and made Marketplace plans more affordable.

Bottom line

• Subsidies may lapse. If subsidies expire after December 31, 2025, some households will face sharp premium increases. Do not default to STM without understanding the risks.
• STM is a narrow bridge. It can work for healthy people covering a short, defined gap, but it is not a replacement for ACA-compliant coverage.
• Rules are shifting. Federal agencies are reconsidering the 2024 STM limits and not prioritizing enforcement pending new rulemaking, while states set their own guardrails. Today’s option may change tomorrow.

Before you make any decision, talk with a licensed agent who can compare your state’s current STM options with ACA plans, Medicaid/CHIP eligibility, employer alternatives, and other pathways.

Quick resources 

• HealthCare.gov. Open Enrollment dates and Special Enrollment Period rules.
• KFF. What happens if enhanced ACA subsidies expire?
• healthinsurance.org. State-by-state STM availability overview.
• Federal Register. 2024 STM rule and disclosure requirements, plus the 2025 enforcement statement.