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When you’re shopping for an individual health insurance plan, the options can seem overwhelming. If you’re considering short-term plans vs. ACA marketplace plans, you may think one is simply a cheaper alternative.

But while an affordable short-term health insurance plan might look like a great way to save money, the plan has limitations. Short-term health insurance isn’t designed to be a permanent health insurance solution, but rather a stopgap solution when you’re in between plans,

Below we’ll compare short-term health insurance plans with ACA plans so you can make the right choice.

  • Most states allow short-term health insurance plans, which offer low premiums and limited coverage.
  • Short-term plans often don’t cover prescription drug benefits, mental health, and maternity care.
  • Short-term plans don’t provide the protections found in ACA marketplace plans.

What do ACA plans cover?

By law, an ACA plan can’t turn you down due to pre-existing conditions like chronic illnesses. The ACA also outlines a list of things that every ACA plan must cover.

The essential benefits under the ACA are:

  • Ambulatory patient services
  • Emergency services
  • Hospitalization
  • Maternity and newborn care
  • Mental health and substance use disorder
  • Prescription drugs
  • Rehabilitation services
  • Laboratory services
  • Preventive and wellness services
  • Pediatric services, including oral and vision care

“If someone has a chronic condition and medical concerns, they should be on an ACA plan to get the robust coverage they need,” Jan Dubauskas, vice president and senior counsel at Health Insurance Innovations says.

Are short-term plans an alternative to ACA plans?

Short-term health plans should be considered as an alternative to COBRA rather than to an ACA plan.

Short-term plans are not meant as long-term health insurance plans to cover people with ongoing health issues. A short-term plan is meant to fill the gap when you’re in between jobs or have started a new job and don’t have health benefits yet.

COBRA plans allow you to keep your former employer’s coverage for up to 18 months after leaving a job. However, they’re usually very expensive since the employer is no longer paying part of the cost.

Short-term health insurance plans can fill that gap at a lower cost, but don’t provide the same level of coverage.

Some states don’t allow short-term plans, while others have limitations.

States that don’t allow short-term plans are:

  • California
  • Hawaii
  • Massachusetts
  • New Jersey
  • New York

States that restrict short-term plans to six months:

  • Colorado
  • Illinois

Places that allow short-term plans for only three months with no renewals:

  • Delaware
  • District of Columbia
  • Maryland
  • New Mexico
  • Vermont
  • Washington

What isn’t covered by a short-term plan?

Short-term plans are only meant for the unexpected, like an accident or sudden illness, rather than regular, ongoing medical care. Unlike ACA plans, short-term plans can turn you down for your past medical history and won’t cover any pre-existing conditions. The essential benefits of an ACA plan don’t apply, which means they don’t cover all of the same things.

Short-term plans can exempt coverage of those services or place limits on them. An example is prescriptions. A short-term plan may cover medication if you go to the hospital for an unexpected condition. However, the plan likely won’t cover a prescription for a pre-existing chronic condition like asthma.

In addition, short-term plans don’t usually cover maternity care.

ACA marketplace vs. short-term plans: Cost comparison

Short-term health plans are inexpensive. Dubauskas estimates you can find plans that cost about $100 a month.

The average cost of an ACA plan depends on a lot of factors, but here are the average rates nationwide for each tier, according to the Kaiser Family Foundation.

Nationwide average premium, monthly$342$448$472

If you qualify for subsidies based on your income, you can find ACA plans for less than a short-term plan. There are also catastrophic plans available through the ACA that are cheaper, but have strict requirements to qualify. It’s worth looking into both options to find a cheaper rate.

ACA marketplace vs. short-term plans: When can you enroll?

ACA plans allow you to enroll or make changes to your plan during open enrollment. That is between November 1 and December 15 in most states.

There are a handful of states with longer open enrollment:

  • California: November 1 to January 31
  • District of Columbia: November 1 to January 31
  • Massachusetts: November 1 to January 23
  • Minnesota: November 1 to December 22
  • New Jersey: November 1 to January 31
  • New York: November 1 to January 31
  • Rhode Island: October 15 to December 31
  • Washington, D.C.: November 1 to January 31

You can also sign up or make changes to these plans if you qualify for a special enrollment period. These periods are only if you have a qualifying life event, including:

  • Divorce
  • Marriage
  • Birth or adoption of a child
  • Death of a spouse or partner that leaves you without coverage
  • Your spouse or partner, who has you covered, loses his/her job and health insurance
  • You lose your job and with it your health insurance
  • Your hours are cut making you ineligible for your employer's health insurance plan
  • You are in an HMO and move outside its coverage area

On the other side, you can enroll in a short-term plan at any time.

“The premise of (short-term plans) is you never know when someone is going to lose a job,” Dubauskas says.

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