How short-term medical insurance works

Short-term medical insurance (also called short-term limited-duration insurance or STLDI) provides temporary coverage for people who need immediate protection but don’t have access to an ACA-compliant plan. Insurers design these policies to cover acute events—like injuries, sudden illnesses, or emergency care—rather than routine preventive services or comprehensive chronic disease management.

Under federal guidelines implemented since 2018, an initial short-term policy can run up to 12 months with the possibility of renewal; however, states can—and many do—set stricter limits or ban renewals. Always check your state rules before enrolling (see the National Conference of State Legislatures for a state-by-state summary) (NCSL).

Who typically considers short-term coverage

Short-term plans are most useful when you need quick, temporary coverage and are willing to accept trade-offs in benefits and consumer protections. Common situations include:

  • Gaps between jobs when employer coverage has ended but new coverage hasn’t started. In such cases, compare short-term plans with options like COBRA continuation coverage (see our detailed guide to What is COBRA continuation coverage?).
  • A new job’s benefits that begin after a waiting period. A short-term plan can bridge that delay.
  • Recent graduates or people leaving a parent’s plan who need immediate, temporary protection.
  • Individuals whose income disqualifies them from Medicaid but who need a low-cost interim option.
  • Early retirees not yet eligible for Medicare—paired with longer-term planning (see our piece on Medicare enrollment strategies to avoid penalties and gaps).

In my practice as a CPA and financial planner, I’ve recommended short-term coverage a handful of times—for example, when a client needed immediate hospitalization coverage while waiting 60–90 days for employer benefits to start. We chose a plan that covered emergency and inpatient services but we accepted it would not cover ongoing medication for a pre-existing condition.

Key limitations to understand before you buy

Short-term plans come with specific, often costly limitations. Common features include:

  • No guaranteed issue: Insurers may underwrite applications, ask health questions, or deny coverage.
  • Exclusions for pre-existing conditions: Most short-term policies exclude care related to conditions that existed before enrollment.
  • Limited or no coverage for prescription drugs, maternity care, mental health care, or preventive services.
  • No requirement to cover the ACA’s essential health benefits—so hospitalization and emergency care may be covered, but outpatient specialty care, rehabilitation, or durable medical equipment might not be.
  • They typically don’t count as minimum essential coverage for marketplace subsidy calculations and aren’t ACA-compliant.

Authoritative sources like the Kaiser Family Foundation have long highlighted these trade-offs and recommended consumers read policy terms carefully (KFF).

Comparing short-term plans with other gap-coverage options

  • Short-Term vs. COBRA: COBRA lets you keep your employer’s exact group plan for a limited time (usually 18 months in many cases) but you pay the full premium plus an administrative fee. Short-term plans can be cheaper but offer narrower benefits. If you’re eligible for COBRA, compare costs and covered services before choosing (see our COBRA guide).

  • Short-Term vs. Marketplace coverage: Marketplace (ACA) plans provide guaranteed issue, essential benefits, and potential premium tax credits. If you qualify for a Special Enrollment Period, an ACA plan is usually the better choice for comprehensive care. Short-term may still be useful when you miss open enrollment and don’t have a qualifying life event.

  • Short-Term vs. Medicaid/Medicare: Medicaid and Medicare offer broad protections for eligible people. Short-term plans can’t substitute for these programs; they are stopgaps, not long-term solutions. If you approach Medicare eligibility, review timing carefully and consider resources like our Medicare timing and enrollment guides.

Practical checklist: Should you sign up for short-term medical insurance?

  1. Confirm the exact coverage window you need (start/end dates).
  2. Compare the premium, deductible, coinsurance, and out-of-pocket maximums—not just monthly price. A low premium can hide high cost-sharing.
  3. Read exclusions line-by-line: look for pre-existing condition language and prescription/maternity limits.
  4. Ask whether the plan is renewable in your state and for how long. Document renewal terms in writing.
  5. Check provider networks and whether the plan covers in-network vs. out-of-network care.
  6. Compare alternatives: COBRA, marketplace Special Enrollment, Medicaid, short-term—pick the option that minimizes total financial risk.

If you’re unsure, get a written benefits summary and run a simple worst-case cost comparison: premium + deductible + expected co-pay for a likely hospital stay.

Real-world examples and scenarios

Example 1 — Job transition: Maria leaves her employer on May 31 and accepts a new job that starts August 1 with health benefits effective November 1. COBRA is costly; Maria chooses a short-term policy that covers June 1 through October 31. The plan covered emergency admissions but excluded her previously diagnosed migraine treatments.

Example 2 — Recent graduate: Jamal graduates in May and won’t begin employer coverage until January. He can either buy an ACA plan during a Special Enrollment Period if eligible or, if not, purchase a short-term policy to cover immediate acute needs. We modeled costs—Jamal’s ACA plan was only marginally more expensive after premium tax credits, so he chose the marketplace plan for better protection.

These cases illustrate why comparing total expected out-of-pocket costs matters more than monthly premium alone.

Tips for shopping and negotiating

  • Get the Summary of Benefits and Coverage (SBC) and read it. Insurers must provide an SBC for major features.
  • Confirm any waiting periods for coverage of certain services and whether emergency care is treated differently.
  • Ask for written confirmation of renewability and how premium increases are handled.
  • Use a licensed broker or agent who can compare multiple insurers; they can also help verify state-specific rules.

Common mistakes to avoid

  • Assuming a short-term plan covers chronic medications or maternity care.
  • Not checking state laws—some states cap the duration or prohibit renewals.
  • Forgetting that short-term policies can be rescinded for material misrepresentations during application.

How to decide: a simple decision tree

  1. Do you qualify for COBRA and can you afford it? If yes, compare covered benefits vs. short-term costs.
  2. Are you eligible for an ACA Special Enrollment Period or premium tax credits? If yes, prefer marketplace coverage.
  3. Is your need strictly temporary and are you willing to accept narrow coverage? If yes, a short-term plan may make sense.

Regulatory and state considerations (2025 update)

Federal rules allow short-term plans to be sold for initial terms up to 12 months with possible renewals, but many states set different limits or disallow renewals—check your state insurance department or the NCSL state tracker before buying (NCSL). Remember some states have individual mandates or additional consumer protections; use Healthcare.gov’s state pages for guidance.

Authoritative sources and further reading

  • Healthcare.gov — special enrollment and state resources (Healthcare.gov).
  • National Conference of State Legislatures (NCSL) — state rules on short-term plans (NCSL).
  • Kaiser Family Foundation (KFF) — comparisons and policy analysis on STLDI (KFF).

For complementary reading on nearby topics, see our guides to What is COBRA continuation coverage? and Choosing Short-Term Coverage During Job Transitions. If you’re planning around retirement or Medicare timing, review Medicare enrollment strategies to avoid penalties and gaps.

Professional disclaimer

This article is educational and reflects best practices and examples from my experience as a CPA and financial planner. It is not insurance or legal advice. Rules and plan terms vary by state and insurer—consult a licensed insurance agent or your state insurance department to confirm specifics for your situation.