Short-Term Health Insurance: The Cheap Plan Trap

ACA Marketplace premiums jumped roughly 26% this year for the average mid-level plan, according to KFF and the Commonwealth Fund. If you're shopping for coverage right now and seeing those numbers for the first time, your stomach probably dropped. Mine did.

So when a Google ad offers you health insurance for $70 a month, it's tempting to click. That's the pitch behind short-term, limited-duration health plans: cheaper premiums, quick enrollment, coverage that starts fast. What the ads leave out is everything those plans won't pay for when you actually need them.

What short-term plans actually are

Short-term health insurance was originally designed for people between jobs who needed a few months of basic coverage. Think of it as a stopgap, not a replacement for real insurance. These plans aren't regulated under the Affordable Care Act, which means they don't have to follow the same rules that Marketplace plans do.

That distinction matters more than most people realize.

Because short-term plans sit outside the ACA, insurers can deny your application based on your health history, charge women more than men, exclude pre-existing conditions entirely, and cap how much the plan will ever pay out. KFF's 2025 analysis of nine large insurers across 36 states found that the maximum benefit limit on some short-term plans was as low as $100,000 per policy term. If you've ever seen a hospital bill for a surgery or a week in the ICU, you know $100,000 can disappear fast.

ACA plans, by contrast, are legally prohibited from imposing annual or lifetime dollar limits on covered services.

The coverage gaps are massive

The numbers from KFF's review of 30 distinct short-term products are bleak. 40% didn't cover mental health services. 40% excluded substance abuse treatment. 48% left out outpatient prescription drugs. 94% didn't cover adult immunizations. And 98% excluded maternity care.

Read that last number again. If you're a woman of childbearing age, 98% of these plans won't cover pregnancy.

Even the plans that do cover some of these services attach heavy restrictions. Prescription drug coverage, for instance, often comes with a $1,000 to $5,000 cap per policy term. Some plans limit you to a single primary care visit. Others cap inpatient hospital stays at 31 days. And nearly all of them exclude pre-existing conditions, with broad language that can catch conditions you didn't even know you had. If symptoms "should have" caused a "reasonably prudent person" to seek care before you enrolled, the plan can deny your claim.

Compare that to any ACA plan, which must cover all 10 essential health benefits (hospitalization, mental health, prescriptions, maternity, preventive care, and more) with no lifetime caps and an out-of-pocket maximum of $9,200 for an individual.

The real cost of a cheap premium

A short-term plan for a 40-year-old non-smoker might start at $70 per month. The cheapest unsubsidized Bronze ACA plan in the same city might run $350 or more. On the surface, that's a $280 monthly savings.

But the comparison falls apart when you factor in three things.

First, hidden fees. Most short-term insurers charge application fees ($20 to $35) and require you to join a special "association" to be eligible. Some of those memberships add $15 to $25 per month. That $70 plan can quietly become $100+.

Second, deductibles. Short-term plan deductibles range from $500 to $25,000, according to KFF's review. Twenty-five thousand dollars. ACA Bronze plan deductibles cap at $9,200. And here's the part that scares me: many short-term plans have no out-of-pocket maximum at all, meaning there is no ceiling on what you could owe. ACA plans must cap your total spending at $9,200 for the year.

Third, subsidies. About 93% of ACA Marketplace enrollees receive premium tax credits. In some cities, a subsidized Bronze plan for someone earning around $45,000 costs less than the cheapest short-term plan. If you qualify for subsidies and you're buying a short-term plan instead, you may be paying more for dramatically worse coverage.

Why these plans are everywhere right now

The timing isn't an accident. ACA premiums rose significantly this year, partly because enhanced premium tax credits are set to expire. The Commonwealth Fund reported that average ACA premiums increased roughly 26% for 2026, and out-of-pocket costs jumped with them.

At the same time, the regulatory environment shifted. In August 2025, the administration announced it would stop enforcing Biden-era regulations that limited short-term plan durations and required standardized consumer warnings. That means longer plan terms, fewer disclosures, and more aggressive marketing.

Short-term plans are now available in 36 states. Five states (California, Illinois, Massachusetts, New Jersey, and New York) ban them outright. Nine more states plus D.C. have regulations strict enough that no insurers bother selling them there.

If you live in one of the 36 states where these plans are sold, you're probably seeing ads for them. The marketing is designed to catch people during the exact moment they're frustrated with ACA premiums.

Who short-term plans might (actually) work for

I'm not saying these plans are always a bad deal. There are narrow situations where they make sense.

If you're healthy, between jobs, and need coverage for two or three months while you wait for employer benefits to start, a short-term plan can fill that gap. The key conditions: you have no pre-existing conditions, you won't need prescriptions or mental health services, and you understand that a serious accident or illness could still leave you with enormous bills.

That's a thin window. For most people in most situations, the risk-reward math doesn't hold up.

What to do instead

Open enrollment for 2027 ACA Marketplace plans begins November 1, 2026. Before you default to a short-term plan, run the real numbers.

Start by checking your subsidy eligibility at HealthCare.gov or your state's exchange. Plug in your income and see what the actual premium would be after the tax credit. Even with the enhanced credits expiring, plenty of people still qualify for real help. You might find that a Bronze plan costs less than you expected.

Then compare total costs, not just the monthly number. A $70 premium with a $10,000 deductible and no out-of-pocket cap is not cheaper than a $200 premium with a $9,200 cap on everything. Run the math on what you'd owe after a car accident or an appendectomy, not just a healthy month.

Also worth knowing: the administration expanded access to catastrophic plans on the Marketplace this enrollment period. These are ACA-compliant, meaning they cover all essential benefits and have out-of-pocket limits. The premiums are lower than Bronze, though cost-sharing is higher. For young, healthy people trying to keep costs down, they're a much better safety net than a short-term plan.

One more thing to keep in mind. If you buy a short-term plan and then decide you want Marketplace coverage, you can't switch until the next open enrollment period. Short-term plans aren't considered "minimum essential coverage" under federal law, so dropping one doesn't qualify you for a Special Enrollment Period. You'd be stuck waiting.

The bottom line

Short-term health insurance is not health insurance in the way most people understand that phrase. It's a limited product with real coverage holes, and the gap between what it promises and what it pays can be tens of thousands of dollars.

With open enrollment starting next month, take 30 minutes to price out a real ACA plan before you sign up for something that looks cheaper on paper. The premium savings from a short-term plan aren't worth much if a single ER visit wipes out your emergency fund.