If you’ve searched for cheap health insurance, you’ve probably seen ads for short-term plans with surprisingly low monthly prices. They can be a useful stopgap for some people — and a costly trap for others. Here’s how to tell the difference.
Key takeaways
- Short-term plans are not ACA-compliant: they can deny you, exclude pre-existing conditions and skip essential benefits.
- You can’t use premium tax credits on them.
- Federal rules on how long they can last are under review, and state rules vary widely — some states ban them.
- Before buying, check whether you qualify for a subsidized Marketplace plan or Medicaid. Many people do.
What short-term health insurance is
Short-term, limited-duration insurance (STLDI) is temporary medical coverage meant to bridge gaps — for example, between jobs or until a new employer’s coverage starts. Because it’s exempt from most Affordable Care Act rules, insurers can design these plans very differently from Marketplace plans.
How long can a short-term plan last?
A 2024 federal rule limited these plans to 3 months, renewable to 4 months total. In August 2025, federal agencies announced they would revisit that rule and not prioritize enforcing the shorter limit while doing so. As of fall 2026, a new rule had not been finalized. In practice, plan lengths now depend heavily on your state’s laws — some allow plans close to a year and renewals up to 36 months, while others restrict or ban short-term plans entirely.
What they often don’t cover
- Pre-existing conditions — often excluded, sometimes with a lookback of several years.
- Maternity care — frequently excluded.
- Mental health and substance use treatment — often limited or excluded.
- Prescription drugs — sometimes excluded or capped.
- Preventive care — not required to be free.
Many plans also have benefit maximums — a cap on what the plan will pay in total — and may review your medical history after you file a large claim (“post-claims underwriting”).
Short-term plan vs. Marketplace plan
| Short-term plan | Marketplace (ACA) plan | |
|---|---|---|
| Can deny you for health history | Yes | No |
| Covers pre-existing conditions | Often no | Yes |
| Essential health benefits | Not required | Required |
| Premium tax credits | No | Yes, if eligible |
| Annual out-of-pocket cap | Not required | Yes ($12,000 individual max in 2027) |
| Lifetime/annual benefit limits | Allowed | Not allowed |
| When you can enroll | Usually any time | Open enrollment or a qualifying life event |
When a short-term plan might make sense
- You’re healthy, missed open enrollment, and don’t qualify for a Special Enrollment Period.
- You need a few weeks of coverage before a new job’s plan begins.
- Your income is too high for subsidies and you understand exactly what isn’t covered.
Who should avoid short-term plans
- Anyone with an ongoing health condition or regular prescriptions
- Anyone who is or may become pregnant
- People whose income qualifies them for Marketplace tax credits — a subsidized Bronze plan may cost about the same and protect far more
- People who just lost job-based coverage — you likely qualify for a Special Enrollment Period for a real ACA plan
Watch for misleading sales tactics. Some websites and call centers present short-term plans or “health discount cards” as if they were full insurance. Ask directly: “Is this an ACA-compliant plan? Does it cover pre-existing conditions? What’s the maximum it will pay?” Get the answers in writing.
Frequently asked questions
Is there a tax penalty for having a short-term plan instead of ACA coverage?
There’s no federal penalty for not having ACA coverage. A few states — including California, Massachusetts, New Jersey, Rhode Island and Washington, D.C. — have their own coverage requirements and may penalize residents without qualifying coverage.
Does losing a short-term plan let me enroll in the Marketplace?
Generally no. Losing short-term coverage usually isn’t a qualifying event for a Special Enrollment Period, because it isn’t considered minimum essential coverage.
Are short-term plans the same as fixed indemnity plans?
No. Fixed indemnity plans pay a set dollar amount per day or per service, regardless of your actual bill. They’re meant to supplement real insurance, not replace it.
What’s a cheaper alternative with real protection?
Check a subsidized Bronze plan, a Catastrophic plan if you’re under 30 or qualify for a hardship exemption, or Medicaid if your income is low.
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Sources: U.S. Departments of Labor, HHS and Treasury (2024 STLDI rule; August 2025 statement); HealthCare.gov; state insurance departments. Rules vary by state and may change. For education only — not insurance advice. Last reviewed October 2026.
