Insight: Short-term health insurance offers lower premiums than a standard health insurance policy. But it does not cover mental health, outpatient prescription drugs, and other expenses. Here’s what you need to know about temporary health coverage.
If you’re between jobs or have a gap in your health insurance coverage, you might consider purchasing short-term health insurance. As the name suggests, short-term health insurance is a temporary plan that can provide coverage when you don’t have a standard policy.
One of the biggest benefits of a short-term health insurance plan is that it’s typically cheaper than a regular plan. If you need temporary coverage and are in good health, short-term coverage might be a good option.
However, short-term health insurance has its limitations. These plans usually have restricted benefits, which can lead to high out-of-pocket costs when you need certain types of medical care. Also, if you have pre-existing conditions, you may not qualify for short-term health insurance.
If you’re considering short-term health insurance, it’s important to first weigh the pros and cons. What follows is some key information about short-term health insurance coverage, how much it costs, and what alternatives are available.
- Short-term health insurance is generally affordable for people who are healthy and don’t need frequent medical care.
- Compared to standard plans, short-term health insurance provides less coverage, which can lead to higher out-of-pocket costs.
- Temporary health insurance is not available in every state, and not all health insurance companies offer this type of plan.
- You can usually extend an annual short-term health plan twice, but you’ll need to purchase a standard policy after that.
- A short term health insurance plan costs less than $100 a month.
What is short-term health insurance?
Short-term health plans are low-cost, low-coverage plans.
These plans are available in most states for up to one year with the option to extend the plans twice. In effect, you could have a short-term plan for three years. That’s unlike regular health insurance, which has an annual renewal period.
A good way to think of short-term plans is that they’re temporary health insurance with lower premiums, higher out-of-pocket costs and less coverage than a standard health plan.
What does a short-term health plan cover?
Every short-term health plan is different in terms of what is and isn’t covered.
Short-term medical insurance isn’t influenced by the Affordable Care Act (ACA). The ACA’s minimum essential coverage demands that standard health insurance plans offer a minimum level of coverage. However, there’s no minimum essential coverage in short-term health insurance.
Instead, federal regulations allow short-term plans to create coverage plans without any required mandates found in a regular health insurance plan.
“In many cases, short-term health insurance plans cover the same services as major medical plans,” says Chris Foley, a licensed health insurance broker with Abbot Benefits Group. “However, you need to be careful when comparing policies. Some short-term health insurance plans exclude certain preventive care services, which can be very limiting.”
So, what do short-term health plans typically cover?
“Covered services generally include hospitalizations, outpatient surgeries, emergency room and urgent care visits, doctor visits, and, sometimes, prescription drugs,” Foley says.
When shopping for temporary health plans, you should also find out what is not covered.
This will differ with every plan, but here are several services that usually are not part of short-term health plans:
- Mental health and substance abuse
- Outpatient prescription drugs
- Maternity care
Because maternity care is not automatically covered, like with an ACA plan, short-term health insurance might not be the best option for people who are looking to start a family. However, it’s possible that some plans will cover pregnancy and postpartum care (it just depends on your specific plan).
“Short-term health plans have a lot of fine print exclusions,” says Betsy Imholz, special projects director at Consumers Union. “It’s worth noting that 40% of pregnancies in the U.S. are accidental. So, women of childbearing age need to be mindful of that excluded coverage in short-term plans.”
There’s also the issue of being denied coverage. While ACA plans require that insurers approve everyone regardless of health status, short-term plans can reject you. Some states may require “guaranteed issue,” which means a plan must cover you, even if you have pre-existing conditions. However, federal law doesn’t demand that for short-term plans.
A short-term plan may reject you if you have a pre-existing condition or may charge you exorbitant premiums. That’s not allowed in ACA plans.
Imholz said short-term plans can also cap the amount they pay to cover you annually and limit how much it will spend on specific services, such as hospitalizations.
So, if your short-term plan covers hospitalizations but only up to $5,000, you’ll be on the hook for any amount above $5,000. That’s one reason why it’s critical to dig into what a specific short-term plan covers before signing up.
Short-term plans can also have hefty out-of-pocket costs. Many short-term plans have lifetime limits on what they’ll cover. If you have a short-term plan and are diagnosed with a costly illness, the plan may stop paying for care after a limit is reached, such as at $100,000.
Additionally, short-term plans can limit what they pay for specific treatments and hospitalizations. And, if you are able to find a short-term health plan with good benefits and high amounts of coverage, you’ll probably pay a much higher premium.
How to get short-term health insurance
An Internet search for short-term health insurance offerings in your state can get you on track to find a plan.
Some major health insurers, such as UnitedHealthcare, offer short-term plans. Don’t confuse that coverage with regular health insurance. Just because a big-name insurer offers a short-term plan doesn’t mean that the plan provides full health insurance coverage. It’s not always easy to distinguish between plans, so reading the fine print is critical.
“One thing consumers can do is to ask the agent or company for a Summary of Benefits and Coverage, which is a standardized form required for (Affordable Care Act) plans to help people compare plans. If there is not one available, that’s an indicator that it’s not an ACA-protected plan,” said Imholz.
Who qualifies for short-term health insurance?
Most states allow short-term health plans, but some states ban the plans while others limit the length of the coverage.
However, even if your state allows short-term plans, an insurance company can still reject you based on your health. “If you have been diagnosed with a major medical condition or are currently pregnant, you may not qualify for short-term health insurance,” Foley says.
Here’s who may benefit from a short-term health plan:
- A young person who is healthy and doesn’t expect to need many health care services.
- A person who missed open enrollment for other health insurance and doesn’t qualify for a special enrollment.
- Someone who’s out of work and can’t afford COBRA or an ACA plan but wants some level of insurance.
- Someone who will soon qualify for Medicare and does not want to enroll in another year-long plan.
People with pre-existing conditions like asthma or diabetes should avoid short-term plans. Even if a short-term plan covers you, your pre-existing condition will likely lead to significant premiums. The plan also probably won’t provide enough coverage to make it worth your while.
However, if you’re healthy and don’t plan on using healthcare services often, a short-term plan can be a wise choice. But, be prepared to disclose your level of health. “Individuals are usually required to answer health questions before an insurance company will approve them for a short-term health insurance plan,” adds Foley.
Of course, you can’t predict your health for the next year. Imholz gave the example of one woman who bought a short-term plan. She was healthy and thought it was a good fit. Then, she was diagnosed with diverticulitis. The plan covered that ailment but not the infection that arose from the condition. The plan declined to cover the treatment and deemed it a pre-existing condition. That decision left her with thousands of dollars of medical bills.
“Accidents and illness often come unexpectedly, so while you may be healthy today, life can change in an instant. If you can swing a marketplace policy, it’s a much safer, better deal,” Imholz said.
Short-term plans have their drawbacks, but they’re an option if you need to bridge a gap between employer plans when you change jobs. A short-term plan is a lower-cost alternative to COBRA insurance or an individual plan, though with much fewer protections. It’s also better than not having any coverage at all.
How much does a short-term health plan cost?
“Short-term health insurance is almost always cheaper than a standard plan,” Foley says.
You can find a short-term health insurance plan for less than $100 a month. Compare that with the average of more than $400 for unsubsidized ACA-compliant health plans.
However, Imholz said premiums are just one piece of a financial puzzle. You must also look at a plan’s deductibles, copays, coinsurance and dollar limits and exclusions of services that aren’t covered in short-term plans.
You may find that a low-cost, short-term medical plan may actually cost you more than an individual health insurance plan in the long run.
“There are all sorts of pitfalls in these skinny plans that may not be evident at first blush and aggressive marketing emphasizing their lower premiums may make them sound tempting. But short-term plans cost less in premiums because they cover less. If you fall into one of the many gaps these plans have, it will end up costing you a lot more in the longer run,” Imholz said.
Pros and cons of short-term health insurance
You can think of short-term health plans as gap health insurance. These plans help bridge a gap between standard health insurance, such as if you’re between jobs and don’t want to pay the high costs of COBRA. You may even find that you’re not eligible for COBRA and don’t have that choice.
Here are the pros and cons of short-term health insurance:
- Low premiums
- No open enrollment period, so you can buy any time
- May have a wider network than some Affordable Care Act plans
- Short-term plans can cover you internationally
- Limited coverage
- Large out-of-pocket costs if you need care
- You can only keep coverage for a limited time
- May not cover pre-existing conditions
Indemnity plan vs. short-term health insurance
An indemnity plan is an alternative to a standard health insurance plan with a network of providers, such as preferred provider organization (PPO) and health maintenance organization (HMO) plans.
With an indemnity plan, you as the member decide on which doctors and hospitals to visit. The health insurance company pays a part of the total charges.
Members likely have to pay more costs for services upfront and submit a claim to the insurance company. The company reviews the claim and then pays the doctor or hospital.
An indemnity plan offers more freedom than an HMO or PPO, but it also may mean more upfront costs and paperwork processing for you.
How does an indemnity plan compare to a short-term health plan? Let’s look at how they’re similar and how they’re different.
Both types of plans:
- Cost less than standard health insurance
- Restrict coverage for pre-existing conditions
- Offer higher-out-of-pocket costs
- Can reject coverage
Here’s how they differ:
- Short-term health insurance coverage has a time limit.
- Indemnity plans usually offer more coverage.
- Short-term plans often have higher deductibles, so there’s more costs when you need care.
- Indemnity plans often cover prescription drugs, while short-term plans don’t usually provide that coverage.
If you’re deciding between a short-term plan and an indemnity plan, make sure to read the fine print and understand exactly what the plans cover and your responsibilities.
How long will my short term coverage last?
Most states allow you to have a short-term health plan for a year with the option of extending coverage another two years.
States that forbid the sale of short-term plans include:
- New Jersey
- New York
Other states have regulations that restrict short-term plans beyond the federal rules:
- Colorado and Illinois limit short-term plans to six months.
- Delaware, the District of Columbia, Maryland, New Mexico, Vermont and Washington only allow short-term plans for three months with no renewals.
Also, some states allow short-term plans, but no companies offer short-term plans in those states. Rhode Island is one state that allows short-term health insurance, but no companies currently offer plans there.
Is short term health insurance available for families?
Yes, you can sign up for family coverage with a short-term health plan.
However, remember that short-term health insurance has limited coverage. You may not be able to find a plan with mental health, prescription drug and maternity care, which means you would have to pay for all of the costs for that care.
Short-term plans can also exclude pre-existing conditions.
So, you want to review your family’s health history, prescriptions, likely doctor visits and what a short-term plan would cover before signing up for one.
How quickly can I get coverage?
There isn’t a lengthy waiting period with short-term insurance.
You fill out the application, the company reviews the form and decides whether to accept you. After that, you can get coverage within days — even within 24 hours after paying your first premium.
Is preventive care covered under short term health insurance?
Unlike health plans governed by the Affordable Care Act, short-term health plans decide what they will and won’t cover. You may find one short-term plan that covers some preventive care, while another plan doesn’t.
It’s vital that you read the fine print before signing up for short-term health insurance to know exactly what the plan will cover.
That puts more pressure on the consumer to determine whether a particular short-term health plan is a wise choice.
–Les Masterson contributed to this article.
Frequently Asked Questions
What is the best short-term health insurance?
The best short-term health insurance for you depends on your specific health and needs.
Major health insurance companies like UnitedHealthcare, which is underwritten by Golden Rule Insurance Company, offer short-term plans. Other short-term plans come from smaller insurers like Everest, Pivot Health and National General.
Companies don’t offer short-term health plans in all states, so you must see what companies offer plans in your area. Once you know who offers policies, dig into the fine print to see what’s covered and what’s not covered by each plan.
Also, look for coverage caps and how much you may pay in both premiums and out-of-pocket costs.
Can you buy health insurance for one month?
Yes, companies offer short-term health insurance plans for a month.
Short-term plans are meant as a temporary way to get coverage. It’s not meant as a long-term health insurance solution.
Is short-term health insurance worth it?
Whether short-term health insurance is worth it depends on your health, how much you need health care and what you want from a health plan.
If you’re healthy, don’t often see a doctor and aren’t on prescription drugs, a short-term health insurance plan may work for you. Short-term plans have low premiums, so that might interest you.
However, remember that short-term insurance has limited coverage, so you’ll pay more out-of-pocket when you need care.
What states allow short-term health insurance?
Most states allow short-term health insurance.
States that forbid the sale of short-term plans include California, Hawaii, Massachusetts, New Jersey and New York. Other states allow plans, but for a limited time, such as six months.
Some states allow temporary health insurance plans, but no companies offer short-term plans in those states.