You just got laid off. Your COBRA payment is $700 a month. You've got a new job starting in two months. What do you do? This is exactly the situation short-term health insurance was designed for. But here's what most people don't realize: short-term plans have changed dramatically in 2024, and they're not the budget-friendly solution many think they are.
Let's cut through the confusion. Short-term health insurance can be a lifesaver in the right circumstances, but it can also leave you with massive medical bills if you don't understand what you're buying. This guide will help you figure out if short-term coverage makes sense for your situation—and what alternatives might work better.
What Is Short-Term Health Insurance?
Short-term health insurance is exactly what it sounds like: temporary coverage designed to bridge gaps when you're between more comprehensive health plans. Think of it as a band-aid, not a solution. These plans are meant for unexpected accidents or sudden illnesses during your coverage gap—not for managing ongoing health conditions or getting preventive care.
As of September 2024, federal regulations now limit these plans to a 3-month initial contract period, with a maximum total duration of 4 months including any renewals. This is a major change from previous years when some plans could extend for up to 36 months. The goal? To prevent people from using bare-bones short-term plans as long-term substitutes for comprehensive coverage.
The biggest advantage of short-term plans is availability. You can buy them year-round without waiting for open enrollment, and coverage can start as soon as the next day. But that convenience comes with significant trade-offs in what's actually covered.
What Short-Term Plans Don't Cover (And Why It Matters)
Here's where things get tricky. Short-term health insurance isn't subject to the Affordable Care Act's consumer protections. That means insurers can—and do—exclude coverage that ACA-compliant plans must provide. These aren't minor details; they're major gaps that could cost you thousands.
Pre-existing conditions are completely excluded. Have diabetes? Your insulin won't be covered. Taking medication for high blood pressure? You'll pay out of pocket. Had an ACL injury last year? Your knee isn't covered, even if a completely unrelated issue comes up. Insurers will ask detailed medical questions during application and can deny coverage outright based on your health history.
Most short-term plans also exclude: preventive care (annual checkups, screenings, vaccines), maternity and newborn care, mental health and substance abuse treatment, prescription drug coverage, and pediatric services including dental and vision for kids. Some plans offer limited prescription coverage or mental health benefits, but these are exceptions, not the rule.
Perhaps most importantly, short-term plans can impose annual and lifetime dollar limits on coverage. If you have a serious accident and rack up $200,000 in medical bills, but your plan has a $50,000 annual maximum, you're personally responsible for the remaining $150,000. ACA plans are prohibited from having these caps, which is a critical protection most people don't think about until it's too late.
Short-Term vs. ACA Marketplace Plans: The Real Cost Comparison
At first glance, short-term plans look like a bargain. Most cost between $60 and $250 per month, while the average ACA Bronze plan costs about $364 monthly for a 40-year-old. But this comparison misses the most important part of the equation: premium subsidies.
As of 2024, 93% of ACA Marketplace enrollees receive premium subsidies that dramatically reduce their monthly costs. You cannot use these subsidies for short-term plans. For example, a 40-year-old in Houston earning $45,140 annually (the median individual income) would pay less for a subsidized Bronze ACA plan than for the cheapest short-term option—5% less for males and 23% less for females.
Beyond premiums, ACA plans offer significantly more comprehensive coverage. They must cover the ten essential health benefits, including emergency services, hospitalization, prescription drugs, mental health care, and preventive services at no cost to you. You're also protected from medical underwriting—insurers can't charge you more or deny coverage based on your health status or gender.
The catch with ACA plans is timing. You generally need to enroll during Open Enrollment (November 1 to January 15) or qualify for a Special Enrollment Period triggered by life events like losing other coverage, getting married, having a baby, or moving. Short-term plans, by contrast, are available year-round with coverage starting almost immediately—within 60 days of application.
When Short-Term Coverage Actually Makes Sense
Short-term health insurance works best for very specific situations. You're between jobs and your new employer's coverage starts in 2-3 months. You've just graduated and aged out of your parents' plan but don't have employer coverage yet. You're waiting for Medicare eligibility and need something to bridge the gap. You missed Open Enrollment, don't qualify for a Special Enrollment Period, and need some coverage until the next enrollment window opens.
The ideal candidate for short-term coverage is someone who: is relatively healthy with no ongoing medical conditions, doesn't take regular medications, isn't pregnant and doesn't plan to become pregnant during the coverage period, can afford to pay out-of-pocket for routine care and prescriptions, and needs protection primarily against catastrophic accidents or sudden illness.
If you have any ongoing health conditions, take regular medications, or might need surgery for a known issue, short-term insurance is probably not your best option. The pre-existing condition exclusions mean you'll be paying premiums but getting almost no benefit for the health issues you actually need to manage.
State-by-State Variations You Need to Know
Federal regulations set the baseline, but states can impose stricter rules—and many have. Eight states have essentially eliminated short-term health insurance as an option. California, Massachusetts, New Jersey, and New York prohibit the sale of short-term plans that lack ACA-level protections for pre-existing conditions. Colorado, Connecticut, New Mexico, and Rhode Island have imposed such tight restrictions that no carriers currently offer short-term plans in these states.
Other states may allow longer coverage periods than the federal 4-month maximum or require additional consumer protections. Before shopping for a short-term plan, check your state's specific regulations—what's available to your friend in Texas might not be an option for you in Washington.
Better Alternatives to Consider First
Before you buy a short-term plan, explore these options. If you've lost job-based coverage, you likely qualify for a Special Enrollment Period to buy an ACA Marketplace plan within 60 days. Depending on your income, you might qualify for Medicaid in your state. COBRA lets you keep your employer's coverage temporarily, and while expensive, the premiums might be comparable to short-term plans once you factor in better coverage.
Health sharing ministries are another option some people consider, though these aren't insurance and come with their own limitations. For young, healthy individuals, a high-deductible ACA Bronze or Catastrophic plan might provide better protection at a similar or lower cost when subsidies are factored in.
How to Get Started
If you're facing a coverage gap, start by checking if you qualify for a Special Enrollment Period at HealthCare.gov. Even if you missed a qualifying event, it's worth calling to explain your situation. Next, use the subsidy calculator on the Marketplace to see what ACA plans actually cost with financial assistance—you might be surprised.
If you decide a short-term plan is truly your best option, read the policy documents carefully before buying. Look specifically for: pre-existing condition exclusions, annual and lifetime maximum benefits, coverage exclusions for specific services, provider network restrictions, and renewal terms. Don't rely on marketing materials—the actual policy language will tell you what's really covered.
Short-term health insurance fills a legitimate need for truly temporary coverage. But with new 2024 regulations limiting plans to 4 months maximum and ACA subsidies making comprehensive coverage more affordable than ever, fewer people will find short-term plans to be their best option. Do the math, understand what you're actually buying, and explore all your alternatives before making a decision. Your future self—and your bank account—will thank you.
