The Premium Sticker Shock That's Driving People to Risky Alternatives
I'll be direct with you: millions of Americans are panicking about health insurance right now. Enhanced tax credits that have helped reduce the cost of health insurance for the vast majority of Affordable Care Act enrollees expired overnight, cementing higher health costs for millions of Americans at the start of the new year. And when panic sets in, people make fast decisions—sometimes the wrong ones.
Short-term health plans are suddenly getting a lot of attention. The pitch sounds almost too good: the average cost of short-term health insurance for individuals is about $115 a month, compared to long-term health insurance policies that usually cost around $400 in premiums for individuals and over $1,000 for families.
That price difference is real. But here's what nobody tells you upfront: that $285 monthly savings can evaporate into a $50,000 medical bill faster than you can say "pre-existing condition." I've spent years analyzing health insurance policies, and the gap between what these plans promise and what they deliver is wider than ever in 2026.
What Exactly Are Short-Term Health Plans in 2026?
Let's cut through the jargon. Short-term health insurance (STLDI) is a temporary health plan designed to provide limited coverage during transitional periods, such as between jobs or waiting for ACA-compliant insurance. These plans are not ACA-compliant, typically last one to four months, and offer quick enrollment with minimal underwriting.
The regulatory landscape has been shifting rapidly. On August 7, 2025, the U.S. Departments of Labor, Health and Human Services (HHS), and Treasury announced a re-examination of federal rules for short-term, limited-duration insurance. For now, regulators are pressing pause on strict enforcement of some 2024 coverage rules. This means the rules are in flux, and what's available to you depends heavily on your state.
In many states carriers can now offer short-term plans for up to 36 months, which is three full years of coverage. That sounds like regular insurance, doesn't it? It's not. Short-term plans are not available in 14 states and the District of Columbia. If you're in California, New York, Massachusetts, or several other states, this entire conversation is moot—you can't buy these plans at all.
The Hidden Costs That Will Blindside You
1. The Pre-Existing Condition Trap
This is where the real danger lies. Generally, if you have a short-term plan, your claims for payment of your health treatment will be denied if the provider's services resulted from a preexisting medical condition—in some cases, even a condition that wasn't diagnosed before you signed up for the plan.
Think about what this means. You have slightly elevated blood pressure but never received a formal diagnosis. You buy a short-term plan. Six months later, you have a heart attack. The insurer investigates your medical history and finds that doctor's note about your blood pressure. Claim denied.
After a short-term plan enrollee receives medical care, the insurer may investigate their medical history for evidence that the care they already received is related to a pre-existing condition, a practice known as "post-claims underwriting." That's what happened to a Pennsylvania man who was hospitalized for an abnormal heartbeat but had his medical claims denied because of a previous doctor visit for high blood pressure.
The definition of a pre-existing condition varies by state, but in general, short-term health insurance policies exclude coverage for conditions that have been diagnosed or treated within the previous 2 to 5 years. That's a long lookback period. Asthma you had as a teenager? That could disqualify respiratory claims today.
2. The Deductible and Maximum Coverage Gap
The low premium comes with strings attached. Deductibles for short-term plans range from $500 to $25,000—nearly three times higher than the highest deductible for a Bronze ACA plan. And while ACA plans have no lifetime limits on benefits, short-term plans absolutely do.
Plans usually have a spending cap. For example, a plan might only pay for $250,000 or $1 million in total medical bills. A single serious illness—cancer treatment, a complicated surgery, a premature birth—can blow through a $1 million cap before you leave the hospital.
The deductible for the lowest-priced short-term plans will be in the range of $10,000 versus $7,000 for the least-expensive ACA-compliant plan in the area, and the out-of-pocket maximum will be $20,000 versus $8,300 for the cheapest ACA-compliant plan.
3. The Essential Benefits Black Hole
Unlike ACA plans, short-term plans can impose annual and lifetime caps on benefits. The vast majority do not cover maternity care. Some might not cover prescription drugs.
Here's a partial list of what most short-term plans exclude:
- Maternity and newborn care — If you're planning a family or could become pregnant, you're unprotected
- Mental health and substance abuse treatment — Depression, anxiety, addiction treatment: not covered
- Prescription drugs — Many plans offer zero pharmacy benefits outside of a hospital stay
- Preventive care — Annual checkups, vaccinations, screenings you'd normally get free
- Pediatric services — Kids need comprehensive coverage, not limited protection
Short-term plans exclude many essential health benefits required by the ACA, including preventive care, maternity coverage, mental health services, and prescription drug coverage.
4. Where Your Premium Actually Goes
This one should make your blood boil. The top three companies selling short-term health plans paid 43 percent, 34 percent, and 52 percent of the premiums they collected from short-term plan enrollees for medical claims. By comparison, the ACA requires individual-market insurance plans to pay at least 80 percent of premiums on medical claims or health quality improvement.
Read that again. When you pay $100 to an ACA plan, at least $80 goes toward your actual healthcare. When you pay $100 to some short-term insurers, as little as $34 might go toward paying your medical bills. The rest? Marketing, administration, and profit.
The Real Benefits: When Short-Term Plans Make Sense
I'm not here to tell you these plans are worthless. For the right person in the right situation, they serve a legitimate purpose.
Legitimate Use Case #1: The True Coverage Gap
Short-term health insurance offers several advantages, particularly for those in transitional situations. Key benefits include quick access with a simplified application process, immediate approval in many cases, and coverage often starting as soon as the next day.
You just quit your job and your new employer has a 90-day waiting period for health benefits. You're young, healthy, have no chronic conditions, and just need protection against a freak accident or sudden illness. A three-month short-term plan fills that gap without paying COBRA's full freight.
Legitimate Use Case #2: The Coverage Gap Trap
There are currently almost 1.5 million people caught in the coverage gap in nine states that have not expanded Medicaid. Their household incomes are under the federal poverty level, so paying full price for health insurance may not be a realistic option.
If you earn too little to qualify for ACA subsidies and live in a state that refused Medicaid expansion, you're stuck in a cruel no-man's land. A short-term plan—with all its flaws—might be your only affordable option for any coverage at all.
Legitimate Use Case #3: The Healthy Gambler
Short-term health insurance is a good option for anyone that is currently healthy but wants to make sure that they are covered in case of a sudden illness or injury. If you're 25, in excellent health, have no medications, no chronic conditions, and just want catastrophic protection, a short-term plan is a calculated risk that might pay off.
But understand: you're betting your financial future that you won't get seriously sick or hurt. People lose that bet every day.
The 2026 Context: Why This Matters Now More Than Ever
The stakes are higher this year than they've been in a decade. On average, the more than 20 million subsidized enrollees in the Affordable Care Act program are seeing their premium costs rise by 114% in 2026, according to an analysis by the health care research nonprofit KFF.
Real people are facing impossible choices. Some enrollees, like Salt Lake City freelance filmmaker Stan Clawson, have absorbed the extra expense. Clawson said he was paying just under $350 a month for his premiums last year, a number that will jump to nearly $500 a month this year. Others are looking at their budgets and wondering what they can cut.
The Commonwealth Fund estimates that 5 million Americans will lose their ACA health insurance coverage in 2026 if Congress does not renew subsidies. That's 5 million people who will be shopping for alternatives. Many will end up looking at short-term plans.
How to Evaluate a Short-Term Plan (If You Must)
If you've decided a short-term plan is your only viable option, here's how to minimize your risk:
Step 1: Know Exactly What's Excluded
Short-term health insurance companies aren't required to offer all the essential health benefits covered by ACA-compliant plans. Make sure you know what is covered in any plan you're considering. If you know you have specific needs, such as a particular medication or access to a type of specialist, pay close attention to what those things will cost you on each plan.
Get the policy documents. Read the exclusions section line by line. If prescription drugs aren't covered and you take a daily medication, factor that cost into your "savings."
Step 2: Calculate the True Cost
Don't just compare monthly premiums. Add up the deductible, the out-of-pocket maximum, any services you know you'll use that aren't covered, and any co-pays. The average deductible for individuals on short-term plans is $5,000 and $15,000 for families.
A plan with a $100/month premium and a $10,000 deductible costs you $11,200 before insurance pays a dime. Compare that to an ACA Bronze plan that might cost $250/month but has a $7,500 deductible and covers your prescriptions.
Step 3: Understand the Benefit Cap
STLD plans can also impose lifetime and annual dollar limits for certain medical services. Ask specifically: what's the maximum this plan will pay? What happens if I hit it? Cancer treatment averages $150,000. A complicated childbirth can run $500,000. Where does that leave you?
Step 4: Check the Network (or Lack Thereof)
If the short-term plan has a provider network and the patient stays in-network, the provider's total payment will be adjusted to match the insurer's approved reimbursement rate. But if the health plan does not have a provider network—often touted as a benefit that provides freedom to see any doctor—enrollees should be aware that they may face balance billing for the difference between what the insurer pays and what the provider charges.
"See any doctor" sounds great until you realize you might owe $10,000 more than the insurance covers because there's no negotiated rate.
Alternatives You Should Consider First
Bronze and Catastrophic ACA Plans
For those wanting to stay with ACA plans, the lowest premiums are generally in the categories labeled "catastrophic" or "bronze." Yes, they have high deductibles—deductibles for bronze plans average nearly $7,500 nationally. But they cover pre-existing conditions, have no lifetime limits, and include essential health benefits.
Another option, new for 2026, is expanded eligibility for catastrophic plans, which used to be limited to people younger than age 30. People losing subsidies because of the expiration of the enhanced tax credits can also qualify for the plans.
Medicaid (If You Qualify)
If your income drops or you're in a state that expanded Medicaid, check your eligibility. Medicaid provides immediate coverage with no waiting periods. It's comprehensive, covers pre-existing conditions, and costs you almost nothing.
COBRA (Expensive But Complete)
If you left a job with good insurance, COBRA lets you keep that coverage for up to 18 months. It's often shockingly expensive—you pay the full premium plus an administrative fee—but the coverage is real and comprehensive. For someone with a chronic condition, three months of COBRA might be cheaper than three months of medical bills a short-term plan won't cover.
Spouse or Parent Coverage
If you're under 26, you can stay on a parent's plan. If your spouse has employer coverage, you may qualify to join. These options provide real protection without the gaps of short-term plans.
The Bottom Line: Eyes Wide Open
Short-term plans are just that: insurance originally designed as temporary coverage for situations like changing jobs or attending school. They can look a lot like traditional coverage, with deductibles, copayments, and participating networks of hospitals and doctors. Still, they are not ACA-compliant plans.
The marketing for these plans has become sophisticated. The premiums genuinely are lower. The enrollment is genuinely faster. But the protection is genuinely limited. The Trump administration has stated it won't enforce consumer protections on short-term plans. Consumers could end up enrolled in plans that cover less than they thought and leave them on the hook for higher out-of-pocket costs than are permitted under ACA plans.
If you're young, healthy, have substantial savings, no chronic conditions, don't take regular medications, aren't planning a pregnancy, and just need a few months of catastrophic coverage—a short-term plan might work for you.
For everyone else? That low premium is a siren song. If you have a complex medical history or a high risk of needing care, consider more comprehensive coverage, because you could spend a lot out-of-pocket on a short-term plan.
Before you sign anything, run the numbers. Read the exclusions. Understand what you're giving up to save a few hundred dollars a month. In health insurance, the cheapest option is almost never the best value—and sometimes it's no value at all.