Short-term health insurance is designed to help bridge those occasional coverage breaks that can occur when your existing health plan ends, but your new one has yet to kick in. Often referred to as short-term, limited-duration insurance (STLDI), these plans fill the gap temporarily.
Previously, STLDI policies could extend for less than a year with potential coverage lasting up to 36 months, including any extensions. However, recent federal regulations have capped these plans at a three-month term, with the option to extend for one additional month.
Unlike traditional individual health insurance, short-term health insurance lacks certain federal consumer protections and requirements. It’s not intended as a substitute for comprehensive insurance and isn’t legally sanctioned or available in every state.
How does short-term health insurance work?
These plans do come with some benefits, but they don’t fulfill the federal requirements for "minimum essential coverage." The extent of coverage for health or preventive services can vary significantly between plans.
Underwriting
Eligibility for STLDI usually involves an evaluation by a medical underwriter. Policies often exclude pre-existing conditions, including pregnancy, and poor health might result in denied coverage. If you file a claim, underwriters might check if your condition existed before you purchased your policy. If this proves to be the case, depending on state laws, your claim could be rejected—even if the condition hadn’t been diagnosed before.
Coverage
When it comes to doctor visits, coverage might only go so far, limiting you to just a few appointments. Services such as mental health care, maternity care, or treatment for substance abuse might not be covered. Prescription drugs are another area where coverage may be limited or entirely absent, with some policies offering a discount card instead. With these, you’d need to pay for medications out of pocket, albeit at a reduced rate.
Out-of-pocket costs
Typically, STLDI plans do have a cap on out-of-pocket expenses, but be aware that copays and deductibles might not count toward this limit. These policies tend to include high deductibles. Moreover, they can impose annual or lifetime coverage limits on crucial benefits, meaning a serious illness or accident could leave you with substantial uncovered expenses.
What does short-term health insurance cover?
The degree of coverage offered by short-term health insurance is variable since these policies aren’t bound by federal health standards, leading to significant differences in what each plan provides.
What doesn’t short-term health insurance cover?
Some services generally excluded from short-term policies include substance abuse treatment.
Who offers short-term health insurance?
These plans are only available through private insurers, and even then, only in certain states. Since they’re not compliant with the Affordable Care Act (ACA), you won’t find them on the health insurance marketplace.
What are alternatives to short-term health insurance?
Marketplace health insurance
If you experience a lapse in coverage, no matter how brief, it might qualify as a “qualifying life event” under the ACA. This means you could be eligible for a special enrollment period to join a marketplace plan offering more comprehensive coverage. With possible subsidies and tax credits, you might obtain a marketplace plan with minimal premiums—significantly lower than short-term insurance. Plus, it’s easy to cancel if you later gain employment-based insurance or coverage through a family member.
COBRA health insurance
In situations where losing your job necessitates short-term insurance, you can continue your existing employer-provided insurance through the Consolidated Omnibus Budget Reconciliation Act (COBRA). This option can extend your coverage for 18 to 36 months, but be prepared to shoulder the entire premium cost yourself.
