Is short-term health insurance right for you? Pros, cons and gaps

Short-term health insurance often shows up as the cheapest option when you search for coverage. Sometimes it's a reasonable bridge. Other times it leaves people facing bills they assumed were covered. Here's how to tell the difference.

What short-term health insurance is

Short-term health insurance (sometimes called short-term limited-duration insurance) is temporary coverage designed to fill a gap — for example, between jobs or while you wait for other coverage to start.

It's sold by private insurers, but it isn't a Marketplace plan and doesn't have to follow the same rules as comprehensive health insurance. How long a plan can last, and whether it can be renewed, is limited by federal rules and, in some places, by stricter state rules. Some states don't allow short-term plans at all.

The pros

Lower premiums, in many cases. Because short-term plans can cover less and screen applicants' health, monthly premiums are often lower than unsubsidized comprehensive plans.

Quick start. Coverage can begin soon after you apply, sometimes within days.

Available year-round. You don't need to wait for open enrollment or qualify for a Special Enrollment Period.

Some protection for the unexpected. For a healthy person, a short-term plan can help with a sudden accident or illness during a short gap.

The cons

Pre-existing conditions are often excluded. Many short-term plans ask about your health and can decline your application or refuse to pay for conditions you had before coverage began. This can include conditions you didn't know you had.

Benefits can be limited. Comprehensive plans must cover a set of essential health benefits. Short-term plans don't have to. Commonly excluded or limited areas include:

• maternity and newborn care,
• mental health and substance use treatment,
• prescription drugs, and
• preventive care.

Caps on what the plan pays. Some short-term plans limit how much they'll pay per illness or over the life of the policy. Comprehensive plans don't have lifetime or yearly dollar limits on essential benefits.

No financial help. Premium tax credits only apply to Marketplace plans. If you qualify for financial help, a Marketplace plan could cost about the same or less — with much more coverage.

It may not count as a qualifying loss. When a short-term plan ends, that usually doesn't open a Marketplace Special Enrollment Period. You could be left waiting until open enrollment.

Where the gaps catch people out

Real-world tip: Before buying a short-term plan, read the "exclusions and limitations" section of the policy — not just the brochure.

Common surprises include:

• a claim denied because the insurer decides the condition existed before the policy started,
• a prescription you take regularly not being covered,
• a pregnancy that begins during coverage not being covered, and
• reaching a per-condition payout cap partway through treatment.

When short-term coverage might make sense

A short-term plan may be reasonable if all of these are true:

• you need coverage for a short, defined gap,
• you're generally healthy with no ongoing treatment,
• you don't qualify for a Special Enrollment Period, or you've compared and still prefer short-term coverage, and
• you understand and accept what it won't cover.

When it probably isn't the right choice

Look carefully at other options first if:

• you have an ongoing health condition or take regular medication,
• you're pregnant or planning to be,
• you might qualify for Marketplace financial help or Medicaid, or
• you need coverage for more than a short period.

Check these options first

Marketplace plan with a Special Enrollment Period. Losing other coverage, moving, getting married or having a baby can let you enroll outside open enrollment. With financial help, the cost may surprise you.

Medicaid or CHIP. If your income has dropped, you or your children may qualify. You can apply any time.

COBRA. If you're leaving a job, you may be able to keep your employer plan for a while.

A family member's plan. A spouse's job-based plan, or a parent's plan if you're under 26.

Questions to ask about any short-term plan

• How long does coverage last, and can it be renewed in my state?
• How does the plan define and handle pre-existing conditions?
• Which benefits are excluded or limited?
• Is there a maximum the plan will pay per condition or overall?
• What's the deductible and out-of-pocket exposure?
• Which doctors and hospitals can I use?

The bottom line

Short-term health insurance can be a useful bridge for the right person in the right situation. But it isn't a substitute for comprehensive coverage, and the lowest premium isn't always the lowest cost.

A licensed agent can check whether you qualify for a Marketplace plan or financial help first, and explain exactly what a short-term policy would and wouldn't cover before you decide.