Understanding ‘Short-Term’ Health Insurance Plans

The federal government has issued health insurance rules allowing people to shop for so-called “short-term plans.” These plans will be offered for relatively long periods — just under a year at a time, with renewals for up to 36 months — and they will be marketed extensively in most states.

Most of these plans will be much less expensive than plans on the Affordable Care Act (ACA or Obamacare) markets and to some people they may look like a better option. But the plans are cheaper for a reason: They cover fewer medical services than comprehensive insurance and they will cost more for people with pre-existing health problems, if they’ll cover them at all.

So buyer beware. Such plans frequently contain a lot of fine print and are riddled with coverage holes and gaps, at least more than the ACA plans that most people who buy their own insurance currently have.

Most importantly, understand that these plans often don’t cover some types of care, including prenatal and maternity care; mental health and drug treatment and prescription drugs. In a recent survey of short-term plans, the Kaiser Family Foundation found that only a few covered those broad categories of care.

Some also skip sports injuries and other common medical problems. Research from Kaiser and the consumer advocacy group Families USA found that limitations on specific treatments were common. Details differ by plan, but examples include:

  • Joint replacement surgery
  • Cataract treatment
  • Hernia repair surgery
  • Treatment for any injury incurred while the patient was intoxicated
  • Injuries resulting from organized sports
  • Treatment for acne or moles
  • Treatment for chronic fatigue or pain
  • Immunizations

One last thing: Plans that follow the ACA rules are required to spend at least 80 percent of all premium dollars on medical care, with only 20 percent going toward overhead and profits. But there are no such rules for short-term plans. According to research from the National Association of Insurance Commissioners, the average short-term plan in 2017 spent less than 65 percent of premium dollars on medical care. Some of the short-term plans keep more than half of all premiums as overhead and profit.