Lauren Chase
Lauren Chase is on the Research team at GoodRx.

You may be familiar with the most common avenues for accessing health insurance, like your employer, Medicaid, Medicare, or the individual health exchanges created by the Affordable Care Act (ACA). But if you recently lost coverage through your employer, aged out of your parent’s insurance, or stopped qualifying for Medicaid, navigating the insurance landscape may leave you feeling confused. It’s always important to consider your options carefully to make sure you enroll in the right plan for you.

When exploring your healthcare options, you might have come across something called a short-term insurance plan. While these plans can seem like a good alternative, as they are often cheaper than standard options, they can also put you at high financial risk in the long term.

Here’s what you should know before signing up for a short-term health insurance plan.

What is short-term health insurance?
Short-term insurance plans provide temporary medical coverage and are bought through private insurance companies. They usually last 3 months or under, but in some states they can last 1 to 3 years.

It works similarly to other types of health insurance — you pay a monthly premium and in return the plan helps cover some medical costs. The catch? Short-term health insurance plans don’t have to adhere to any federal regulations, unlike health insurance marketplace plans and most employer-sponsored plans.

How much does short-term health insurance cost?
Like all insurance, your cost will depend on the plan. You will be responsible for a monthly premium, as well as any associated healthcare costs. Premiums for short-term health insurance plans are usually much lower than those of ACA plans. But there’s a reason why they’re less expensive. The plans often don’t cover much, and only smaller amount of that monthly premium actually ends up going towards medical services.

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What do short-term health insurance plans cover?
Under the ACA, plans offered on the healthcare exchanges must adhere to certain standards. They must cover what are called essential health benefits as well as pay for a certain portion of those benefits. These include prescription drugs, doctor’s services, hospital care, mental health services, and more. They also can’t reject you or charge you more for having a pre-existing condition.

Short-term plan benefits and cost sharing will vary. Often, they are just there to provide coverage for catastrophic medical situations. For example, one analysis of 12 different short-term plans found that 11 of them excluded almost all coverage of prescription drugs, and many others excluded preventive care. And, you may be paying out of pocket even for covered services anyway, due to their high deductibles.

Because the ACA regulations don’t apply to these plans, there are several scenarios in which your medical services might not be covered:

You have a pre-existing medical condition: Short-term plans may use your health history to determine eligibility, and usually don’t want to provide coverage for services related to pre-existing conditions. For example, if you already had asthma, cancer, diabetes, or a chronic illness, and need treatment related to your condition, you could be denied coverage.
They refuse to reimburse a provider: Most regulated health insurance plans have a limited network of health providers, with agreed contract rates. But most short-term plans don’t have a network. Instead, they will apply their own set rate to a medical claim. So, if your provider bills more for the medical service than what the plan is willing to pay, you will be on the hook for the rest of the bill.
Limited coverage for most medical services: Most short-term health plans don’t cover maternity care, prescription drugs, or many other medical benefits. And, for the services that are covered, there are limitations on how much cost sharing the plan will take on.
How long can you have short-term health insurance?
Prior to 2017, federal regulations limited the duration of short-term plans to less than a year. But the Trump administration has since repealed those limits. Now, consumers can buy short-term plans that last a year and have the option to renew these plans for three years.

Depending on the state you live in however, short-term plans may not be available, or they may be highly regulated. Short-term health plans are currently banned in California, and they don’t exist in Massachusetts, New York, New Jersey, and Rhode Island due to stringent regulations.

Check out this resource to find out the laws for your state.

Should you sign up for a short-term plan?
It depends. To start, try and think about what your health and financial needs will be during the period you would need short-term coverage for. If you have a pre-existing condition or know you’ll need a lot of medical services, know that you will most likely be responsible for the bulk of your medical costs.

If you like the idea of a reduced premium, start by checking whether you qualify for any subsidies on the health insurance marketplace, like tax credits or cost-sharing reductions.

Finally, if you do decide that a short-term health plan is right for you, be careful. Read the exclusions and limitations of your plan thoroughly before you decide to purchase. The last thing you want is to be paying for insurance that doesn’t cover your needs.