What’s the Difference? Short Term Health Insurance vs. ACA Health Plans
Short Term health insurance, what’s also referred to as Temporary health insurance or Term health insurance, provides flexible and fast health coverage for those times when you face a gap in your health insurance coverage. If you’re between jobs, leaving school or your parent’s health insurance plan, or losing your current coverage and weighing your options, Short Term insurance can be a good solution, offering affordable health insurance right when you need it.
However, and this is important: A Short Term health insurance plan is not the same as an Affordable Care Act (ACA) health insurance plan.
Short Term: Not an ACA Plan Replacement
It’s an understatement to say that the Affordable Care Act (ACA), also called Obamacare, changed the health insurance landscape. Consumers are still trying to navigate those changes and to understand what the ACA health plans offer them and what those plans will cost them.
Some companies selling health insurance claim Temporary health insurance is an affordable health insurance replacement to an ACA health plan. You can save hundreds on your health care spending with it, they argue. They even measure premium costs with Short Term health plans against those you would have with an ACA health plan.
The only problem with that: Short Term insurance and ACA health insurance aren’t really the same type of health care coverage at all.
Short Term Health Insurance vs. the Essential Health Benefits
Obamacare understands the difference. The ACA doesn’t consider Short Term health insurance minimum essential coverage, and you may face a tax penalty for choosing Short Term over ACA coverage.
According to the ACA, to meet the minimum essential coverage standard, medical insurance plans (with a few exceptions) must include at least 10 essential health benefits (see sidebar).
Short Term health insurance is more limited. Doctor visits and outpatient care, Emergency services, Hospitalization, and Laboratory services/tests are often covered in some way in Short Term health plans. But that’s where the similarities to ACA health plans end. The other 6 essential health benefits are a different story in most Short Term insurance plans:
Maternity and newborn care—Generally, pregnancy is not covered in Short Term plans, except for complications. Benefits for newborn care are often limited.
Pediatric services—Not covered unless mandated by your state.
Rehabilitation services—Limited in most Short Term plans.
Mental health and substance use disorder services, Prescription drug coverage, and Preventive care—In Short Term, you will find no coverage or limited coverage in these categories, depending on the plan you choose.
That Short Term health insurance doesn’t include all the essential health benefits outlined by the ACA isn’t necessarily a bad thing. Not everyone requires all those benefits, and Temporary health insurance gives those people another option.
The ACA’s 10 Essential Health Benefits
- Doctor visits and other outpatient care (also called ambulatory services)
- Emergency services
- Hospitalization
- Maternity and newborn care
- Mental health and substance use disorder services
- Prescription drug coverage
- Rehabilitative and habilitative services/devices (for example, physical therapy after a stroke, speech therapy for children)
- Laboratory services/tests
- Preventive and wellness care
- Pediatric services, including oral and vision care
Other Short Term Differences You Should Consider
Short Term health insurance has a few other key differences from ACA plans you should weigh before you make a health insurance decision.
It’s not guaranteed issue. This means that whereas you are guaranteed acceptance into an ACA health plan, with Short Term you have to apply, answer a series of medical questions and be approved before you can be covered.
Preexisting conditions aren’t covered. If you come into a Short Term medical plan with any preexisting condition, expenses related to that condition will not be covered. They are covered in ACA plans.
You may face a tax penalty. Because all the essential health benefits aren’t covered, plans aren’t considered minimum essential coverage, meaning you may face a federal tax penalty in 2018 under Obamacare if you choose to go with Short Term. Starting in 2019, the federal tax penalty for not having minimum essential coverage goes away.
Terms are limited. Generally with an ACA plan as long as you keep paying the premium, you keep the plan. With Short Term insurance, you pick the length of time you want to be covered. That can be up to 360 days in some states, but it does vary by state. Toward the end of that time, if you still need coverage, you can apply for a new plan in some (but not all) states. Check plans available where you live for details.
Coverage is available year round. This is one place where Short Term health insurance is more flexible than ACA plans. With ACA plans you have to wait for a yearly open enrollment period or have a qualifying event to apply for coverage. Short Term insurance is available year round. You can apply for it at any time.
Finally, check any Short Term policy for lifetime and/or annual dollar limits on health benefits to be sure you're comfortable with them. If your Short Term coverage expires or you lose eligibility for it, you might have to wait until an open enrollment period to get other health insurance coverage.
Really the question of Short Term versus ACA comes down to what you really need. Short Term health insurance is limited coverage for a limited period of time. If that fits your situation right now, and if you can deal with the other differences the plans have, then Short Term may be your product of choice.
How Short Term and ACA Health Insurance Plans Really Stack Up
ACA Health Plans
10 essential health benefits
Preexisting conditions covered
You may get tax subsidies
Plan generally continues as long as you pay premium
Guaranteed issue—you’re automatically accepted for coverage
Change or buy health plans only during open enrollment or with qualifying event
Generally higher premiums than Short Term plans
Short Term Health Plans
More limited benefit packages
Preexisting conditions are NOT covered
You may face tax penalities
When your term ends, you can apply for a new plan in some states
Must apply, answer medical questions and be approved for coverage
Apply for plans at any time, no open enrollment or qualifying event needed
Generally lower premiums than ACA plans
For more Information on Short Term Health Insurance
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