Lower-Cost Short-Term Health Plans: What You Should Know

Short-term, limited-duration health plans are meant for people facing temporary breaks in coverage, such as those between jobs or those waiting to become eligible for Medicare. These plans can be bought for periods of up to six months, and they are often cheaper than marketplace plans for two main reasons.

One reason is that they are not bound by ACA requirements, so they may leave out important benefits. Short-term plans often exclude maternity care and may not have an annual limit on out-of-pocket costs. Some of them also cap what they will pay in a year, which can leave policyholders exposed to large surprise bills.

The other reason is that, unlike ACA marketplace plans, these policies can reject applicants based on health status. By avoiding people who are likely to cost more, insurers can keep premiums lower, but that also means people who are not in excellent health may struggle to find a company willing to sell them one of these plans.

Because they can pull healthier consumers out of the broader market, these plans have been banned in five states over concerns that they weaken market stability.

Alternatives that resemble insurance

Another option that may seem affordable is a healthcare sharing ministry, where people who share religious beliefs pool money to help pay medical bills. Their websites can look similar to those of health insurers, often with different plan choices and benefit levels, but they avoid standard insurance terms such as “premium” or “deductible” because they are not insurance.

Since they are not regulated as insurance companies, these ministries are not required to follow consumer protections or other state or federal rules. There is also no guarantee that they will pay your medical bills when you file a claim.

Like short-term plans, healthcare sharing ministries may deny coverage based on your medical history, exclude preexisting conditions, and limit how much they will pay in benefits.

Another lower-cost choice available in 14 states is health coverage sold by a farm bureau. These arrangements are similar to healthcare sharing ministries in that they are restricted to a specific group of people: to enroll, you must belong to the state’s farm bureau, although that does not mean you need to work in agriculture.

These plans also are not covered by federal or state insurance regulations. As with short-term plans, they can keep prices down by omitting some ACA-required benefits and screening out people with higher expected medical costs. Unlike short-term plans, however, there is no limit on how long you can keep farm bureau coverage.

What should you do?

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

If you are single and earn less than $64,000 a year, part of a couple earning less than $87,000 a year, or part of a family of four earning under $132,000, you may still qualify for a premium subsidy. You will also know that the plan you buy is real insurance, with a standard set of benefits and strong consumer protections.

If you are looking at 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 overview of what the plan covers, including examples showing how much it would pay for two specific conditions: diabetes and childbirth. Insurers and employers that offer coverage must provide this document to anyone who applies. If they cannot produce it, the product may not be actual insurance.

If you do receive a summary of benefits and coverage, read it closely. As noted above, some cheaper options cost less because they cover far less. Do not assume they include all the benefits you would expect from health insurance, or that they will pay the full cost of your care.

Finally, never put your phone number into a website asking whether you need insurance. This area is full of scams, including cases in which telemarketers led consumers to pay hundreds of dollars a month for fake health insurance.

Health insurance is costly because health care is costly, which means consumers face difficult trade-offs. There is no simple answer, but beware of plans that seem 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.