Cheaper Health Insurance Plans Can Carry Hidden Risks for Americans Hunting for Lower Costs

For many Americans, healthcare expenses are a major worry, and insurance premiums are a big reason why.

Reduced federal subsidies for Affordable Care Act plans pushed premiums sharply higher for millions of people in 2025, prompting many to drop coverage. With premiums expected to climb further and Medicaid work requirements scheduled to take effect in January 2027, a growing number of Americans are searching for affordable alternatives.

We are health economists who study public policies designed to expand health insurance coverage. On a personal level, we are fortunate to be among the roughly 160 million Americans covered through an employer.

For people who do not work for a large employer that offers health benefits, however, getting coverage for a family can be confusing and increasingly costly.

Those searching for cheaper choices have likely seen several options. Some may seem attractive and may even be suitable in certain situations, but they can also come with serious drawbacks.

Weighing the trade-offs

In the past, people without employer-sponsored coverage had few options. Before the Affordable Care Act took effect in 2014, insurers could charge higher premiums based on health status, exclude preexisting conditions, or refuse coverage altogether.

The ACA ended that kind of discrimination, established a baseline of 10 essential benefits that plans must cover, and required preventive care to be fully covered. It also created income-based subsidies that people could use to buy coverage through newly created online marketplaces.

Cheaper plans that are not sold through ACA marketplaces are essentially remnants of the pre-ACA insurance system.

Wherever people obtain coverage, choosing a health plan always involves trade-offs. Plans with higher premiums generally offer more comprehensive protection, including lower out-of-pocket costs when care is needed and broader provider networks.

Some of those trade-offs are obvious when comparing plans, but some low-cost options hide limitations that are not immediately clear.

Short-term plans with lower prices

Short-term, limited-duration plans are intended for people with temporary gaps in coverage, such as those between jobs or those months away from Medicare eligibility. These plans can be purchased for up to six months and are often cheaper than marketplace coverage for two main reasons.

First, because they are not subject to ACA rules, they may exclude many essential health benefits. Short-term plans often do not cover maternity care and commonly lack an annual out-of-pocket maximum. In some cases, they also cap the amount they will pay in a year, leaving policyholders exposed to large surprise bills.

Second, unlike ACA marketplace plans, short-term plans can deny coverage based on health status. Screening out people with higher expected costs helps keep premiums down, but anyone who is not in excellent health may not even qualify for one of these limited plans.

Because they can draw healthy consumers away from the broader market, short-term, limited-duration plans are banned in five states.

Options that resemble insurance

Another low-cost choice that may appear attractive is a healthcare sharing ministry. These arrangements bring together people with shared religious beliefs who agree to help pay one another’s medical expenses. Their websites can look a lot like insurance company sites, often displaying different plan levels, but they avoid traditional insurance terms such as “premium” and “deductible” because they are not insurance.

Since they are not regulated as insurers, healthcare sharing ministries are not subject to consumer protections or other state or federal requirements. There is also no guarantee that a ministry will pay your medical bills when you file a claim.

As with short-term plans, these ministries may reject applicants because of health history, exclude preexisting conditions, and limit the amount they will pay in benefits.

Another lower-cost option in 14 states is health coverage sold through a farm bureau. These plans are similar to healthcare sharing ministries in that access is limited to a specific group of people. To enroll, you must be a member of the state’s farm bureau, though that does not necessarily mean you work in agriculture.

These plans are also outside federal and state insurance regulations. That allows them, like short-term plans, to keep prices lower by omitting some ACA-required benefits and screening out higher-cost consumers. Unlike short-term plans, however, there is no time limit on how long farm bureau coverage can last.

What to do instead

Even though marketplace coverage has become much more expensive since 2025, it remains the best choice for many people who need insurance for longer than six months.

If you are single and earn less than US$64,000 a year, a couple with income below $87,000, or a family of four with income under $132,000, you may still qualify for a premium subsidy. You will also know you are buying real insurance that includes a standard set of benefits and strong consumer protections.

If you are thinking about an alternative to marketplace coverage, there are several steps you should take to protect yourself:

Ask for a summary of benefits and coverage. This is a plain-language document that explains what a plan covers and gives examples of what it would pay for two specific situations: diabetes and childbirth. Insurers and employers offering coverage must provide this document to anyone applying. If they cannot produce one, what they are selling may not be insurance at all.

If a summary is provided, read it closely. As noted above, one reason some options cost less is that they cover much less. Do not assume they include all the benefits you would expect from insurance, or that they will fully cover the care you receive.

And never type your phone number into a “do you need insurance” website. That space is full of fraud, including cases in which telemarketers persuaded consumers to pay hundreds of dollars a month for fake health insurance.

Health insurance is costly because healthcare itself is costly, which forces consumers to make hard choices. There is no simple solution, but people should be wary of plans that sound too good to be true. They often are.

This article is republished from The Conversation, a nonprofit, independent news organization bringing you facts and trustworthy analysis to help you make sense of our complex world. It was written by: Thomas Buchmueller, University of Michigan and Helen Levy, University of Michigan

Thomas Buchmueller is a Non-Resident Senior Fellow at the Brookings Institution. He was part of a team that received state funding from 2015 to 2022 to evaluate the Healthy Michigan Plan, Michigan's ACA Medicaid expansion. In 2011-2012 he was the Senior Health Economist at the White House Council of Economic Advisers and from 2023-2025 he was Deputy Assistant Secretary for Planning and Evaluation at the U.S. Department of Health and Human Services.

Helen Levy was part of a team that received state funding from 2015 to 2022 to evaluate the Healthy Michigan Plan, Michigan's ACA Medicaid expansion. She served as a Senior Economist at the White House Council of Economic Advisers in 2010-2011.