When shopping for health insurance outside of — or during — 2027 Open Enrollment, you may come across short-term health insurance plans offering very low premiums. Before you sign up for one over an ACA marketplace plan, understand the significant differences between these two types of coverage.
What Is Short-Term Health Insurance?
Short-term health insurance is a type of limited-duration coverage designed to bridge temporary gaps. These plans are not compliant with the Affordable Care Act. They’re regulated differently — or less — than ACA plans, and they operate with fundamentally different rules about what they cover and who they’ll insure.
Key Differences: ACA Plans vs. Short-Term Plans
| Feature | ACA Marketplace Plan | Short-Term Plan |
|---|---|---|
| Pre-existing conditions | Fully covered | Usually excluded |
| Essential health benefits | All 10 required | Varies; many excluded |
| Maternity coverage | Required | Typically excluded |
| Mental health coverage | Required (parity) | Often excluded |
| Premium tax credits | Available if income qualifies | Not eligible |
| Benefit caps | No lifetime/annual caps (EHB) | Often low caps; can run out |
| Monthly premium | Higher, but offset by subsidies | Lower sticker price |
When Short-Term Plans Can Make Sense
Short-term plans are best suited for very specific, narrow use cases:
- A healthy 26-year-old who aged off a parent’s plan and has a 3-month gap before a new employer plan begins
- Someone who missed Open Enrollment, has no SEP, and needs minimal gap coverage for a few months
- A situation where you genuinely cannot afford any other option and need some catastrophic protection
When Short-Term Plans Are Dangerous
If you have any pre-existing conditions, are pregnant or planning to be, take regular prescriptions, or might need mental health care, a short-term plan can leave you with enormous uncovered bills that a marketplace plan would have covered. Several states (including New Jersey) have banned or heavily restricted short-term plans for this reason.
The Subsidy Factor
Many people buy short-term plans because they look cheaper — but they haven’t accounted for premium tax credits. A Bronze ACA plan that looks like $450/month before subsidies may cost $80/month after credits. Always check your ACA premium after subsidies before comparing to a short-term plan’s sticker price.
Not sure whether a short-term plan or an ACA plan is the right move for your situation? Contact Paul at Garden State Benefits for a no-cost, no-obligation review of your 2027 options — he’s a licensed independent broker serving individuals and families across 26 states.