What is short-term health insurance and what are the pros and cons?

Short-term health insurance provides temporary, lower-cost coverage for gaps between jobs or during waiting periods — but it is NOT ACA-compliant. It can exclude pre-existing conditions, cap benefits, and exclude essential health benefits. Federal rules limit most plans to 4 months; some states ban them entirely.

Short-term health insurance plans are designed to fill temporary coverage gaps — between jobs, during a waiting period before employer benefits begin, or while waiting for ACA Open Enrollment. They typically cost less than ACA marketplace plans, but they lack the consumer protections that the ACA requires. The CMS guidance on short-term plans summarizes federal rules.

Pros

• Lower monthly premiums than ACA marketplace plans — often 20–50% less.
• Can start quickly — often next-day or within a few days of applying.
• Useful for genuinely temporary gaps (job transition, recent graduate, between ACA enrollment windows).
• May cover emergency services and hospitalizations for new conditions.

Cons (significant)

• NOT ACA-compliant: insurers can deny coverage or charge more for pre-existing conditions.
• Do not cover the 10 ACA essential health benefits (no maternity, mental health, or substance use disorder coverage is typical).
• Annual and lifetime benefit caps allowed — meaning coverage can run out.
• Renewals not guaranteed — insurer can drop you at the end of each term.
• Premiums paid do not qualify for ACA premium tax credits.
• HHS federal rules (2024): most short-term plans limited to 4 months (renewable up to 12 months in some states).

State rules vary significantly

Several states — including California, New York, Massachusetts, New Jersey, and others — ban or severely restrict short-term health plans. Check your state's insurance commissioner website to understand what's available and permitted in your state. In states where short-term plans are restricted, COBRA or ACA marketplace coverage with a Special Enrollment Period is typically the better bridge option.

Federal sources

• Short-term limited duration insurance is not required to comply with ACA market rules, including requirements to cover pre-existing conditions or essential health benefits. — CMS

Key takeaways

• Short-term plans cost less but lack ACA protections — pre-existing conditions can be excluded.
• Federal rules limit most short-term plans to 4 months.
• They do not cover the ACA's 10 essential health benefits.
• Many states ban or restrict short-term plans — check your state before enrolling.
• If you qualify for a Special Enrollment Period, an ACA marketplace plan is usually the safer choice.

Related

• What is COBRA health insurance and how does it work?
• What is a qualifying life event and how does it affect health insurance enrollment?
• What is the Affordable Care Act (ACA) and how does it work?
• What are the health insurance options for self-employed people?

Browse all answers
More answers to common questions about financing, banking, and credit.