What Is Short-Term Health Insurance?

Short-term health insurance closes short gaps in coverage that happen when a person’s current health plan ends and their new plan hasn’t started. It’s also known as short-term, limited-duration insurance, or STLDI.

STLDI previously had a contract term of less than 12 months with a maximum coverage period of 36 months (including extensions). But under the latest federal law, these policies can now have a term of no longer than three months — with a possible one-month extension.

Short-term health insurance isn’t considered individual health insurance, so it doesn’t typically have federal protections and requirements for consumers. Therefore, this type of coverage isn’t considered a substitute for comprehensive health insurance, and it isn’t legal or available in all states.

How does short-term health insurance work?

Short-term health insurance offers certain benefits, however, it doesn’t meet the federal criteria for “minimum essential coverage.” Individual plans may or may not cover certain health or preventative services.

Underwriting

STLDI plans typically go through a medical underwriter to determine eligibility, and policies may have exclusions for pre-existing conditions (including pregnancy). You may even be turned down altogether because of your health.

When you submit a claim, underwriters can investigate to see if your condition existed prior to purchasing the policy, and if they find that it did — depending on your state — your claim may be denied even if your condition was never diagnosed before you bought the policy.

Coverage

Coverage for doctor visits may be severely limited to just a few visits. And certain types of medical expenses such as mental health services, maternity care or substance abuse care may not be covered at all.

Prescription drug coverage may also be limited or not included in the policy. Some policies offer a discount card rather than covering prescriptions, so you’d be responsible for paying the discounted price out of pocket.

Out-of-pocket costs

While the majority of STLDI policies offer an out-of-pocket expense limit, that limit doesn’t always include what you’ve paid in copays or deductibles. And these policies tend to have very high deductibles.

Additionally, short-term health insurance policies can contain annual or lifetime payout limits on important health benefits, so if you have a severe illness or accident, your expenses may not be covered.

What does short-term health insurance cover?

Short-term health insurance doesn’t have to meet federal standards for health coverage, so policies may differ substantially in what they cover.

Short-term health insurance generally provides limited coverage for:

• Doctor visits.

• Urgent care.

• Emergency care.

• Preventive care.

• Prescriptions.

Short-term health insurance generally doesn’t cover:

• Pre-existing conditions.

• Maternity care.

• Substance abuse treatment.

• Mental health services.

Who offers short-term health insurance?

Short-term health insurance can only be purchased through private insurers, and only in certain states where it can legally be sold. Since these policies aren’t Affordable Care Act (ACA)-compliant, they can’t be purchased through the health insurance marketplace.

What are alternatives to short-term health insurance?

Marketplace health insurance

If you’re experiencing a loss of coverage, even if only for a short period, this may be considered a qualifying life event under the ACA, which could make you eligible for a special enrollment period. You may be able to enroll in a marketplace plan that offers more comprehensive coverage and protection. With available subsidies and tax credits, you could qualify for marketplace coverage with a low premium — a much lower cost than short-term health insurance. If you later get health coverage through a new job or a family member, you can easily cancel your marketplace plan.

COBRA health insurance

If you’re looking for short-term health insurance because you lost your job, you’re allowed to keep the insurance you had with your employer under the Consolidated Omnibus Budget Reconciliation Act (COBRA). This coverage is available for 18 to 36 months, but you have to pay the full premium amount.