What Is Short-Term Health Insurance? An In-Depth Overview

What Is Short-term Health Insurance?

Short-term health insurance, also called short-term limited duration insurance (STLDI), is a type of health insurance policy designed for those who are experiencing a temporary gap in their primary healthcare coverage. It does not follow Affordable Care Act (ACA) regulations but can benefit those who are between jobs, need insurance while waiting to be eligible for Medicare, or are waiting for their traditional health insurance coverage to start.

While short-term medical insurance can be helpful in certain situations, there are some potential drawbacks to consider. The following guide provides a deeper insight into how short-term health insurance works and explores some of the pros and cons, so you can decide for yourself whether it might be a suitable solution for you.

How Does Short-term Health Insurance Work?

Short-term health insurance only provides coverage for a limited time, which is typically less than one year or up to 36 months with renewals. Otherwise, short-term health insurance plans generally work in much the same way as an ACA or traditional health insurance policy.

You receive a health insurance card, which you present to your provider so they may bill your insurer for services you receive. Many doctors accept short-term health insurance, but you may need to check your plan to see if it restricts you to using doctors that are within the plan’s network.

Typically, like with traditional health insurance, your healthcare provider submits your medical bill to the insurer and the insurer pays them directly. However, some short-term health insurance plans do not pay directly and require policyholders to submit bills for reimbursement. In this case, you may need to pay upfront or set up a deferred payment or payment plan with your doctor’s office.

Eligibility Criteria

Because short-term health insurance does not have to comply with ACA mandates, there is no guaranteed issue of coverage. In other words, insurance companies can deny coverage or charge higher premiums based on the following eligibility criteria:

• Age and residency: Some STLDI plans require applicants to be between 18 and 64 years old to enroll, and all applicants can only enroll in plans offered within their resident state.
• Health status: Many STLDI plans require medical examinations or questionnaires as part of the application process. Depending on your health, you could be denied coverage altogether or charged a higher premium if you are in poorer health or have a pre-existing condition.
• Coverage needs: As STLDI plans offer limited and temporary coverage, those needing long-term coverage or more comprehensive benefits may not be eligible.
• Access to employer-sponsored health insurance: Those looking to enroll in a short-term health insurance plan may need to confirm that they do not have access to another option, such as employer-sponsored health insurance.

Costs of Short-term Health Insurance

There are typically several cost-sharing components included in short-term health plans. This includes:

• Premiums: The premium is the amount you pay to the plan provider to purchase the coverage. This is typically paid monthly or for the entire plan period at once and is a cost you bear regardless of whether you use the insurance or not.
• Deductibles: A deductible is the amount you pay out of pocket before the insurance starts to pay.
• Coinsurance: Coinsurance is the percentage of your medical costs that you are responsible for paying, such as if your insurer covers 90% of all healthcare procedure costs leaving you to cover the remaining 10%.
• Copayments: A copay is a set dollar amount you pay each time you complete an action, such as visiting a doctor or picking up a prescription.  
• Policy limit: Short-term health plans may also place a limit on the dollar amount the insurer pays for covered medical services while you’re enrolled. Sometimes this amount resets with each policy term, while other plans may have a lifetime coverage maximum.

However, since short-term plans are less regulated, you may find that the cost-sharing elements are higher. In addition, short-term health insurance may not protect you from the financial impact of high medical bills due to coverage maximums and the potential lack of cost-sharing limits. 

Short-Term Health Insurance vs. Marketplace Health Insurance

	Short-term Health Insurance	Marketplace Health Insurance
Average Premium	Generally lower than Marketplace health insurance	Higher than short-term health insurance
Eligible for Subsidies	No	Yes
ACA Compliant	No	Yes
Pre-existing Condition Coverage	Not guaranteed	Guaranteed
Coverage Length	Up to 364 days with limited renewals	Full year with guaranteed renewals
Enrollment Period	Year round	Open Enrollment Period or Special Enrollment Periods

Both short-term health insurance plans and Marketplace health insurance — or ACA plans purchased either through your employer or from the Health Insurance Marketplace — are considered major medical coverage. This means that they are designed to provide comprehensive, robust health care coverage.

However, under federal rules, short-term health insurance plans are not considered individual market coverage, so they are exempt from the ACA’s regulations. This creates many differences between short-term plans and traditional ACA plans.

Short-Term Health Insurance vs. Traditional Health Insurance: ACA Compliance and Coverages

	ACA Compliant	Pre-existing Condition Coverage
Short-term Health Insurance	No	Not guaranteed
Traditional Health Insurance	Yes	Guaranteed

As mentioned, short-term health insurance plans do not have to comply with regulations set by the Affordable Care Act. This means STLDI plans can be more limited in:

• Coverage of ACA essential health benefits: There are 10 essential health benefits that traditional health insurance plans must cover. These include prescription drug coverage, mental health coverage, and more. STLDI plans may offer limited or no coverage for any or all of these benefits, depending on the insurer and plan.
• Coverage of pre-existing conditions: All traditional health insurance plans must cover treatments related to the policyholder’s pre-existing conditions. For example, if you have asthma, traditional health insurance policies must cover your asthma medication. However, STLDI plans can offer limited or no coverage for pre-existing conditions.
• Acceptance of all applicants: Traditional health insurance plans have an enrollment guarantee, meaning no one’s application can be denied due to their health status or needs. However, STLDI plans typically require medical underwriting and may deny coverage or charge higher premiums based on the results.

Short-Term Health Insurance vs. Traditional Health Insurance: Costs

	Average Premium	Eligible for Subsidies
Short-term Health Insurance	Generally lower than traditional health insurance	No
Traditional Health Insurance	Higher than short-term health insurance	Yes

Generally, because short-term health insurance is much more limited in benefits coverage as well as duration, premiums are lower than traditional health insurance. This could offer an affordable way to protect against medical emergencies that may arise before you have the chance to enroll in an ACA-compliant plan at the next enrollment period.

However, those with lower incomes enrolled in an ACA plan may be eligible for federal subsidies that could help lower the overall cost of insurance. Short-term health insurance plans are not eligible for subsidies.

Short-Term Health Insurance vs. Traditional Health Insurance: Coverage Length

	Coverage Length
Short-term Health Insurance	Up to 364 days with limited renewals
Traditional Health Insurance	Full year with guaranteed renewals

Traditional health insurance lasts a full year or more, with guaranteed renewals. This means as long as you continue paying your premiums, your insurer cannot deny coverage or renewals even if your health status changes.

Short-term health insurance, on the other hand, can last up to 364 days. However, you can renew it to maintain continuous coverage for up to 36 months in most states. Short-term insurance terminates at the end of the contract term. Individuals who want to continue coverage can apply for a new policy, but the new policy may be more expensive, or the provider may refuse to write a new policy at all. 

Short-Term Health Insurance vs. Traditional Health Insurance: Coverage Length

	Enrollment Period
Short-term Health Insurance	Year round
Traditional Health Insurance	Open Enrollment Period or Special Enrollment Periods

Traditional health insurance policies have strict enrollment periods:

• Open Enrollment Period: This period runs from November 1 to January 15 the following year in most states.
• Special Enrollment Periods: These Special Enrollment Periods are triggered by specific qualifying life events, such as getting married or aging out of your parents’ health insurance coverage when you turn 26 years old.

You generally cannot enroll in a traditional ACA health insurance plan outside of these periods. In contrast, short-term health insurance does not have any enrollment periods so you can enroll at any time of the year. This can be helpful for individuals who missed the ACA Open Enrollment Period and are not eligible for Special Enrollment.

What Does Short-term Health Insurance Cover?

Short-term health insurance is useful as a stopgap while you wait to enroll in a traditional health insurance plan because it provides general medical coverage. This helps protect you from incurring large medical bills if you seek healthcare services. Benefits covered typically include:

• Preventive care: STLDI plans usually cover basic preventive care services, such as immunizations and wellness exams.
• Outpatient services: Most STLDI plans cover outpatient services, including visits to the doctor, lab testing, and screenings.
• Emergency services: Some STLDI plans cover emergency services like emergency room visits and ambulance transportation.
• Hospitalization: STLDI plans may cover hospitalization expenses, including inpatient care and surgeries.
• Prescription drugs: Most STLDI plans offer some coverage of prescription drugs, though the coverage may be limited.
• Mental health and rehabilitation services: STLDI plans may offer coverage for mental health therapy and counseling, as well as rehabilitation services like physical therapy and occupational therapy.

What Does Short-term Health Insurance Not Cover?

Short-term health insurance does not offer as extensive of coverage as traditional health insurance. Typical exclusions to expect are:

• ACA essential health benefits: The ACA has 10 essential health benefits that all compliant plans must cover. As short-term health insurance does not have to be ACA compliant, plans may offer limited or no coverage at all for these benefits, which include things like maternity care, most outpatient care, and more.
• Coverage for pre-existing conditions: Another ACA mandate is that care for pre-existing conditions must be covered. However, short-term health insurance plans may not cover treatments and appointments related to pre-existing conditions. Even if your pre-existing condition is covered by the plan, there may be a waiting period before coverage begins.

Types of Short-term Health Insurance

As is the case with traditional health insurance, there are multiple types of short-term health insurance plans and insurance companies to choose from and each plan may work a bit differently. The most common types include:

• Preferred Provider Organization (PPO) Plans: PPO plans have a network of preferred healthcare providers, and you receive lower costs for using providers within the network. PPO networks also tend to be one of the largest in the U.S. However, PPO plans still offer coverage for out-of-network care, though that care would have higher costs.
• Health Maintenance Organization (HMO) Plans: HMO plans are more affordable than PPO plans, but have more criteria for coverage. For example, you must designate a primary care physician (PCP), who will coordinate all of your healthcare services. You may only see healthcare providers within the HMO network, and you may need a referral from your PCP to see a specialist.
• Indemnity Plans: Indemnity plans are the most flexible type of STLDI plan, as they allow you to visit any healthcare provider you choose because they do not utilize health insurance networks. Indemnity plans pay a set amount for covered services, and you are responsible for paying any additional costs. However, costs can be steep depending on the amount and type of services you need.

State Limitations on Short-Term Health Insurance Plans 

It’s important to note that in some states, short-term insurance is highly regulated or even banned. Depending on where you live, you may not be able to get a short-term insurance policy, or your policy may have additional state regulations. For example, some states have limited the duration of short-term plans and/or added protections for policyholders with preexisting conditions.

Short-term health insurance plans are currently not for sale in the following states, either because they have been banned by the state or because the restrictions are so strict that insurers have elected not to sell policies there: 

• California
• Colorado
• Connecticut 
• Hawaii
• Maine
• Massachusetts
• New Jersey
• New Mexico
• New York
• Rhode Island
• Vermont
• Washington DC

Other states have imposed regulations, such as limiting the length of time the initial plan can be in place, restricting the number of renewals allowed, and/or prohibiting enrollment in short-term plans during the ACA open enrollment period.

The Advantages and Drawbacks of Short-term Health Insurance

When deciding whether a short-term health insurance plan is the best course of action for you, consider how it could help as well as when another option may make more sense.

The Advantages of Short-Term Health Insurance

• Coverage flexibility: Short-term health insurance generally covers unexpected illnesses and injuries, as well as emergency room visits and inpatient and outpatient hospital services. There are many different plan options, so you can choose one that fits your immediate needs.
• Affordability: These plans can fill in gaps in coverage for individuals who are not eligible for or cannot afford traditional health insurance coverage. Short-term health insurance premiums are generally less expensive than ACA or traditional health insurance premiums.
• Quick enrollment: There’s no need to wait for an enrollment period — you can purchase short-term health insurance at any time. In addition, many short-term health plans can go into effect the day after an application is received. You can also cancel short-term health coverage whenever you like without penalties, such as if you begin a new job and qualify for a special enrollment period to enroll in your employer’s group health plan.
• Network options: Short-term health insurance plans may have provider networks that are more flexible than some other health insurance options, such as HMO plans. This means that you may be able to see the healthcare provider of your choice, even if the provider is outside of your plan’s network.

The Drawbacks of Short-Term Health Insurance

• Eligibility and renewability restrictions: Applicants who have medical conditions may be denied coverage and plans may charge higher premiums based on the applicant’s age, gender, health status, and other factors. In addition, preexisting conditions may be excluded from coverage. Some plans may also drop you if you’re diagnosed with a health condition during your policy period, preventing you from renewing your coverage if needed.
• Coverage limitations: Essential health benefits like prescription drugs, maternity care, preventative care, and mental health care may not be covered. In addition, short-term plans are not renewable. You may be able to apply for a new plan when the original contract period ends, but there is no guarantee of continued coverage.
• Potential expenses: There may not be cost-sharing limits. This can create financial hardship if you need expensive medical care. Your plan may also impose lifetime and/or annual coverage limits, leaving you to pay any excess costs. 
• No standardized regulations: Short-term health plans are not mandated or standard, and there is very little government oversight, so plans can vary widely. 

Consider Short-term Health Insurance If…

• You do not need short-term health insurance for long, such as if you are using it as a stopgap while you wait for other coverage to kick in.
• You are not eligible to enroll in a traditional health insurance plan at the moment because you do not have a Special Enrollment Period and it is outside of the Open Enrollment Period.
• You need a form of emergency protection instead of being completely uninsured.
• You are relatively healthy with few healthcare needs.

Consider An Alternative to Short-term Health Insurance If…

• You need longer coverage and/or more comprehensive benefits.
• You can enroll in a plan from the Health Insurance Marketplace during the Open Enrollment Period or are eligible for a Special Enrollment Period.
• You have access to employer-sponsored health insurance.
• You are in poorer health or have routine healthcare needs.

How to Enroll In a Short-term Health Insurance Plan

Enrolling in short-term health insurance follows a slightly different path than enrolling in a traditional health insurance plan. You can expect to follow these general steps:

1. Compare your STLDI plan options. Research the various plans that are available to determine which plan best meets your healthcare needs and budget. Remember that you can enroll at any time during the year.
2. Complete the application and accompanying health exam or questionnaire. You may need to provide personal information, such as your name, address, date of birth, and social security number. You may also need to answer questions about your health status or undergo a medical exam.
3. Receive confirmation of your application acceptance and pay your premium. Once you have been accepted for coverage, you will need to pay the premiums for the plan. Premiums may be paid monthly or annually, depending on the plan.
4. Enter the waiting period. Some STLDI plans have waiting periods for certain services or treatments. This means that coverage may not begin immediately after enrolling in the plan, and instead you may need to wait several weeks or months before coverage kicks in.
5. Utilize your coverage. Once your coverage is active, you may treat it as any other form of health insurance. However, read over your policy details carefully to best understand your benefits and how they work.

Once your STLDI plan term ends, you may need to enroll in a new plan. STLDI plans may not be renewable or may have limited renewability options. If you need coverage beyond the initial coverage period, you may need to enroll in a new plan, which may have different terms and conditions.

Alternatives to Short-term Health Insurance

Short-term health insurance is not the only solution if you cannot enroll in a traditional health insurance plan. Other options include:

• COBRA: If you are losing your employer-sponsored health insurance, COBRA is an option to keep your existing health insurance intact for several more weeks to months. However, it is generally significantly more expensive once your employer is no longer subsidizing the costs.
• Medicaid: Medicaid is a state-run program that provides free or low-cost health coverage to low-income individuals and families, as well as pregnant people, children, and those living with disabilities.
• Non-insurance health care programs: For help with health expenses, many states, cities, and communities offer programs that provide discounted or free healthcare services, such as community health clinics, discount prescription drug programs, and telemedicine services. These do not operate as insurance, and so may be accessed as needed.

Putting It All Together

If you’re thinking of getting short-term health insurance coverage, it’s important to remember that these types of policies are designed to provide temporary coverage when you need it. If you have the option to get a traditional or ACA plan and you are weighing this against short-term health insurance, be sure to carefully consider your current health needs and whether you anticipate any changes in the future.

Due to certain limitations and fewer regulations, short-term health insurance plans generally do not make sense as a long-term solution for health insurance needs. However, there are some potential advantages, including the ability to get this coverage at any time of the year. These plans are also generally more affordable than traditional health insurance, so if you are generally healthy, it may be a good option to provide extra protection against medical emergencies until you are able to enroll in a long-term plan. After all, if you do not have the option to get traditional coverage at this time, you may find that short-term coverage is preferable to going without any health insurance coverage at all.