Search for “cheap health insurance” and you will be buried in ads for short-term plans with premiums that look too good to be true. They usually are. A short-term plan can cost a fraction of an ACA marketplace plan because it is allowed to do things a marketplace plan cannot: turn you down, exclude the conditions you already have, cap what it pays and leave out entire categories of care.
That does not make short-term coverage useless. For a narrow group of people, in the right state, for a short gap, it can be a reasonable stopgap. This guide explains what these plans actually cover, the federal duration limits and the enforcement pause that has muddied them, which states ban them outright, and how to decide whether a short-term plan or one of the best health insurance companies of 2026 on the marketplace is the smarter buy for your situation.
What short-term health insurance actually is
The formal name is short-term limited-duration insurance, or STLDI. It was designed decades ago to bridge brief gaps between jobs, and it sits entirely outside the Affordable Care Act. According to the National Association of Insurance Commissioners, that means a short-term plan can:
- Deny your application or charge you more based on your health history
- Exclude pre-existing conditions, often defined broadly enough to include anything you were treated for or had symptoms of in the past few years
- Cap total benefits at a dollar amount for the policy term
- Skip the ten essential health benefits that every marketplace plan must cover, such as maternity care, mental health treatment and prescription drugs
The federal duration rules, and why they are in limbo
The duration rules have swung with each administration, and 2026 is the messiest year yet.
The 2024 rule: three months, four months total
A federal rule that took effect for plans sold on or after September 1, 2024 limited short-term policies to an initial term of under three months, with a total duration, including any renewals, of no more than four months.
The August 2025 enforcement pause
On August 7, 2025, the Departments of Labor, Health and Human Services and the Treasury issued a joint statement saying they would not prioritize enforcing the 2024 definition and intended to write a new rule. States were invited to relax their own enforcement as well.
The earlier 2018 rule had allowed terms of just under 12 months, renewable for up to 36 months, and a return to something like that was widely expected in 2026. As of this writing, we have not found a final replacement rule. In practice that leaves shoppers in an awkward spot: the four-month cap is technically on the books, federal regulators have said they are not policing it, and what an insurer will actually sell you depends on your state and the carrier. Read the policy term and renewal language on any quote before you assume you can keep it for a year.
Where you cannot buy one at all
Federal rules set the ceiling; state law sets the floor. Roughly a dozen or more jurisdictions ban short-term plans or regulate them so tightly that no insurer bothers to sell them. That list, as of this writing, includes California, New York, New Jersey, Massachusetts, Illinois, Colorado, Hawaii, Maine, Minnesota, New Mexico, Vermont, Washington and the District of Columbia. If you live in one of these states, this whole category is off the table and your gap options are the marketplace, COBRA or Medicaid. Check your state’s insurance department before shopping, because these lists change.
Short-term plans versus the alternatives
Here is short-term coverage lined up against the three products it competes with. The ACA out-of-pocket maximum for 2026 is $10,600 for an individual and $21,200 for a family, rising to $12,000 and $24,000 for 2027 under the 2027 payment parameters rule from CMS.
| Feature | Short-term plan | Marketplace plan | Catastrophic plan | COBRA |
|---|---|---|---|---|
| Can be denied for health history | Yes | No | No | No |
| Pre-existing conditions covered | Usually excluded | Yes | Yes | Yes |
| Essential health benefits | Not required | All ten | All ten | Same as employer plan |
| Federal cap on what you pay per year | None; plan may cap what it pays instead | $10,600 individual in 2026 | $10,600 individual in 2026 | Employer plan’s limit |
| Premium tax credits available | No | Yes, 100% to 400% FPL | No | No |
| Who can buy | Anyone who passes underwriting, in states that allow it | Anyone during open enrollment or a qualifying event | Under 30, or with a hardship or affordability exemption | Employees of firms with 20+ workers after a qualifying event |
| How long it lasts | Federal cap of 4 months (enforcement paused); state rules vary | Full plan year, renewable | Full plan year; multi-year terms up to 10 years allowed from 2027 | 18 months (36 for some dependents) |
| Losing it triggers a marketplace special enrollment period | No | Yes | Yes | Yes, when it runs out |
The trap most buyers miss: no way back in
This is the single biggest risk of short-term coverage and it rarely appears in the ads. A marketplace special enrollment period opens when you lose minimum essential coverage, such as a job-based plan, COBRA or Medicaid. A short-term plan is not minimum essential coverage, so having one expire does not qualify you. HealthCare.gov spells out the qualifying events on its special enrollment page, and a short-term plan ending is not one of them.
Play that out. You buy a four-month short-term plan in March because you missed open enrollment. It ends in July. Unless something else qualifying happens in your life, you have no path onto a marketplace plan until coverage starts January 1, 2027. That is five months uninsured, or five more months of stacking short-term policies, and anything diagnosed under policy one becomes an excluded condition under policy two.
The other trap is timing at the front end. If you just lost job-based coverage, you have 60 days to enroll in a marketplace plan, and buying a short-term plan does not pause that clock. Our guide to health insurance after losing your job walks through that window.
What short-term coverage really costs
Short-term premiums are set by underwriting, so a healthy 30-year-old will see quotes far below marketplace sticker prices. But the comparison most people make is wrong, because they are comparing a short-term premium to an unsubsidized marketplace premium they may never actually pay.
According to KFF’s analysis of 2026 marketplace enrollment, 87% of enrollees receive premium tax credits and the average net premium after credits is $178 a month. CMS projected that for subsidy-eligible shoppers the lowest-cost plan available averaged about $50 a month after credits.
A worked example
Take a single 35-year-old freelancer who expects to earn $60,000 in 2027 and is deciding between a short-term plan and a marketplace plan during the November 1, 2026 to January 15, 2027 open enrollment.
- For 2027 coverage, subsidies are calculated against the 2026 federal poverty guideline of $15,960 for one person. The 400% cutoff is $63,840, so at $60,000 she qualifies.
- Her income is about 376% of the poverty level, which puts her in the top bracket under IRS Revenue Procedure 2025-25. Her expected contribution toward the benchmark Silver plan is 9.96% of income, or $5,976 a year, which works out to $498 a month.
- Any premium for the benchmark plan above $498 a month is covered by the tax credit. Applied to a Bronze plan instead, the same credit brings her monthly cost lower still.
- Her worst case on the marketplace plan is capped by law at $12,000 in 2027. On a short-term plan there is no such cap, and a plan with a benefit maximum could leave her holding the balance of a serious hospital bill.
If her short-term quote is $150 a month, she saves roughly $348 a month over the benchmark Silver, or about $4,200 a year, in exchange for taking on unlimited downside and losing the ability to re-enter the marketplace mid-year. For a healthy person with savings that may be defensible for two or three months, not for a year. If she earned $65,000 instead, she would be over the cliff and get no credit at all, which changes the math and is exactly the scenario where short-term plans start to look tempting. See our 2026 premium tax credit guide for the full income table.
When a short-term plan makes sense, and when it does not
We are not saying never. These are the situations where the trade-off can be worth it:
- A true gap of a few weeks. You start a new job on the first of next month and the employer plan has a 60-day waiting period. A short-term plan covers you against a catastrophe until the real plan kicks in.
- You missed open enrollment and have no qualifying event. If you are healthy, live in a state that allows these plans and simply have no other option, a short-term plan is better than nothing while you wait for November 1. Screen for Medicaid first; it enrolls year-round.
- Early retirees over 400% FPL who want bare-bones protection for a defined period. Even here, price out an off-exchange Bronze plan first. It has no subsidy either, but it covers pre-existing conditions and caps your exposure.
When it is the wrong choice
- You have any ongoing condition, take a regular prescription or are pregnant or planning to be. The exclusions will hit you.
- Your income is between 100% and 400% of the poverty level. A subsidized marketplace plan will almost always be cheaper for the coverage you get.
- You are within 60 days of losing job-based coverage or COBRA. Use the special enrollment period; you will not get another one.
- Your current insurer is leaving. Cigna is exiting the individual ACA market in all 11 of its states after December 31, 2026, and Molina is shrinking from 14 states to 6. Affected members simply pick a new carrier during open enrollment; do not let a “your plan is ending” letter push you toward a short-term product.
- You are under 30 and want cheap coverage. Look at a Catastrophic plan instead: it is ACA-compliant, covers three primary care visits before the deductible, and from 2027 can run for up to 10 consecutive years. Our metal tiers guide compares it with Bronze.
How to shop if you decide to buy one
- Confirm your state allows it and what maximum term it permits.
- Read the pre-existing condition definition, including the lookback period.
- Find the benefit maximum and per-service limits.
- Check what is excluded entirely. Maternity, mental health and prescription drugs are the most common gaps.
- Put the open enrollment dates in your calendar. November 1, 2026 to January 15, 2027 on HealthCare.gov, with a December 15 deadline for a January 1 start.
Whoever you buy from, the underlying insurer and its policy document are what matter, not the brand on the website. Our list of common health insurance mistakes covers the short-term trap alongside nine others.
Bottom line
Short-term health insurance is cheap because it is allowed to exclude the people and conditions that make health care expensive. In the states that permit it, it can be a sensible bridge for a healthy person with a defined, short gap and enough savings to absorb a bad outcome. It is the wrong product for anyone with a health condition, anyone who qualifies for a premium tax credit, and anyone who might need to get back onto a real plan before the next open enrollment, because losing a short-term plan does not open that door.
Before you buy, run your income through the marketplace once. With 87% of enrollees receiving credits and an average net premium of $178 a month, the compliant option is often closer in price than the ads suggest. Then compare the carriers still standing for 2027 in our guide to the best health insurance companies of 2026.