What is short-term health insurance?

For those purchasing health insurance out of pocket, short-term health insurance sounds like an attractive option. After all, there are lower costs and health insurance coverage kicks in right away. But when you peel back the cover, you’ll see that it doesn’t offer comprehensive coverage—some short-term health insurance plans might not cover pre-existing conditions, mental health care, or prescription drugs. And you often have other options, such as COBRA or coverage under a family member’s plan. So when is short-term health insurance the right choice?

Short-term health insurance was initially designed to be just what it sounds like—a short-term solution for people who needed healthcare coverage during a gap in employment for potential new medical conditions. Originally, you could only be insured under a temporary health insurance plan for up to three months. As of October 2018, however, that’s changed to 364 days, and plans can be renewed for up to 36 months. In theory, someone could enroll in one short-term plan, carry coverage for just under one year, and then switch over to another carrier within the same short-term system. 

However, it’s important to note that not every state offers short-term health plans as an option. They’re unavailable in 11 states, including California, Colorado, New York, New Jersey, and Massachusetts, either because they’re prohibited or because strict regulations mean insurance companies have opted not to offer them. In other states, they can be heavily limited, and regulations vary in terms of how length options and renewals.  

What the insurance policies cover varies widely among insurers and states, but one thing most have in common is that they do not cover pre-existing health conditions. Additionally, they often do not cover every essential health benefit required under the Affordable Care Act (ACA or Obamacare), which include preventive care like routine doctor’s visits, maternity care, and prescription drugs.  

Should I get short-term health insurance? 

Advantages of short-term health plans

Under certain circumstances, short-term health insurance can be really helpful. The biggest advantage is the price point; the monthly premiums can be quite a bit lower than standard health plans. If you’re relatively healthy, don’t foresee any major lifestyle changes (like a pregnancy), in the near future, and are okay with limited coverage, short-term insurance can be a solid safety net and can include other members of your family. 

“It is helpful in certain scenarios, such as in between employment, while waiting for Medicare coverage to kick in, or if you missed open enrollment through your employer or the platforms,” says Yuna Rapoport, MD, MPH, an ophthalmologist at Manhattan Eye in New York City. “Advantages include that it is relatively easy to obtain and coverage can kick in relatively quickly. They are usually low-cost and offer low coverage.”

Temporary insurance also provides flexibility—often coverage’s effective date begins in as little as 24 hours and you can cancel at will. It can be tedious to sign up for health insurance policies, but with short-term coverage, signing up tends to be a simple process, too, with “yes or no” questions.  

RELATED: Change in employment? Learn about COBRA coverage

Disadvantages of short-term health plans

While short-term health insurance can help cheaply bridge the coverage gap between life events like a new job or going away to college, it has some major pitfalls as a longer-term solution. 

Your health status will largely determine if short-term health insurance is an option for you. If you have any pre-existing conditions like asthma or diabetes, you likely will not be eligible for coverage under a short-term health insurance plan. The same goes for mental health conditions and psychiatry. And if it turns out you had a pre-existing condition you didn’t know about or ticked the wrong box in that quick sign-up? You may be out of luck. Short-term medical plans are not ACA compliant, so the insurer may be able to review your previous medical claims—including before they covered you—to determine whether you had a pre-existing condition. 

Additionally, a lot of the basic health that people want out of their medical insurance. Healthcare services like routine doctor’s visits and prescription drug coverage are often excluded from short-term plans. You may also be limited by how much your plan covers, either in a year or in a day, i.e. your ambulance ride costs $500, but your short-term insurance may have a $300 emergency services maximum. So while your monthly premiums may be cheaper, you might end up spending more on out-of-pocket costs than you have budgeted should you need to seek care or have an emergency. 

Depending on when your plan expires, you could also find yourself without other coverage options. If your short-term plan finishes outside of the ACA open enrollment period, you may be ineligible until the next one, as short-term coverage ending isn’t considered a qualifying event that allows a Special Enrollment Period. That could mean a significant period of time where you have no health insurance at all. 

Is short-term insurance a good idea? A summary of pros and cons
Pros	Cons
Cheaper monthly premiums than standard plans	Out-of-pocket costs can be higher due to limited coverage
Immediate coverage that you can cancel at anytime	Increased risk of missing open enrollment
Individual and family plans are available	Does not typically cover pre-existing conditions, mental illness, preventive care, or prescriptions

RELATED: Does Medicare cover pre-existing conditions?

How to get a short-term health insurance plan

If you think a short-term health insurance plan and its minimum essential coverage is the best option for you, the first thing is to find out whether they’re available in your state. If you live in the following states, short-term will not be an option:

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

If plans are available in your area, it’s a good idea to take note of a few things: the coverage period, as some states have shorter limits than others; what your monthly premiums will be; and the fine print plan details. 

Short-term health insurance costs

While on average, short-term health insurance plans are nearly 224% cheaper than ACA plans, it’s a good idea to also take stock of what appointments or prescription renewals you may have coming up as well. For instance, if you have an annual medical physical or regularly refill a prescription, you’ll want to include those healthcare costs as you tally up total out-of-pocket expenses. 

And of course, using SingleCare, whether you’re on a short-term insurance plan or an ACA-qualified one, can help you save on prescriptions. 

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