Short-Term Health Plan Rules

Short-term limited duration insurance (STLDI) plans are temporary health coverage products sold outside the ACA marketplace — cheaper than ACA plans, but with far weaker protections for people with pre-existing conditions. Short-term plans are explicitly exempted from ACA requirements: they can exclude pre-existing conditions, charge more based on health history, offer limited benefits, and are not required to cover the ACA's ten essential health benefits. They also don't qualify for premium tax credits. The trade-off is price: monthly premiums can be 50–80% cheaper for healthy individuals, attracting people between jobs, waiting for employer coverage to begin, or who find ACA premiums unaffordable. The codified federal rule still caps plans at a 3-month initial term, extendable to a combined total of 4 months (the Biden administration's 2024 final rule, 89 FR 23338). However, on August 7, 2025, the U.S. Departments of Labor, HHS, and Treasury announced they will not prioritize enforcement of those duration limits and will not penalize states that apply pre-2024 definitions — effectively returning practical authority to the states while a new federal rulemaking is pending. Some states heavily restrict or ban short-term plans; others allow the pre-2024 ceiling of 364-day initial terms with renewals up to 36 months. The core risk: if you develop a serious illness on a short-term plan, the insurer can decline to renew you at the end of the term — leaving you uninsured mid-treatment — while an ACA marketplace plan cannot. Short-term plans are tools for healthy people who need affordable bridge coverage, not insurance designed for sustained health risk.

Current Law (2026)

Short-term limited duration insurance (STLDI) provides temporary health coverage outside the ACA marketplace, exempt from ACA requirements.

Legal Authority

• 42 U.S.C. § 300gg-3 — Prohibition of preexisting condition exclusions or other discrimination based on health status (ACA guaranteed issue and community rating requirements; short-term limited duration insurance plans are explicitly exempted from these protections, allowing them to deny coverage or charge more based on health status)

How It Works

Short-term plans are explicitly excluded from ACA requirements under 42 U.S.C. § 300gg-3 — which means they can deny coverage or charge more based on health history, impose annual and lifetime benefit caps, and skip the ACA's ten essential health benefits entirely. In practice, most STLDI plans exclude pre-existing conditions (typically any condition for which you received care in the prior 12–24 months), maternity, mental health, prescription drugs, and preventive care. HIPAA portability protections that guarantee coverage continuity between employer plans do not apply. The trade-off is price: for a genuinely healthy person with no recent medical history, monthly premiums can run 40–60% less than an unsubsidized ACA Bronze plan — making STLDI attractive for bridge periods between jobs, new-job waiting periods, or people who find marketplace premiums unaffordable and are willing to accept the coverage gaps.

The primary use cases are specific: a healthy person between jobs who expects to be uninsured for 3–12 months; someone waiting for employer coverage to begin; or a young, healthy individual who primarily wants catastrophic accident and illness coverage at a low price. COBRA continuation is the alternative that preserves full ACA protections — at full employer-plus-employee premium cost. Employers can also fund Individual Coverage HRAs that employees use to purchase marketplace or STLDI plans.

The codified federal rule — the Biden administration's 2024 final rule (89 FR 23338) — still limits initial STLDI terms to 3 months and total duration with renewals to 4 months. But on August 7, 2025, DOL, HHS, and Treasury issued a joint statement confirming they "do not intend to prioritize enforcement actions" against insurers that fail to meet the 2024 definition, and that they will not penalize states for applying their own definitions. The agencies cited President Trump's February 19, 2025 executive order directing review of regulations imposing significant costs on private entities, and announced plans to undertake rulemaking that may roll back the duration limits to the pre-2024 standard (initial terms up to 364 days with renewals up to 36 months). As of April 2026 no replacement rule has been finalized in the Federal Register. In permissive states, insurers have resumed selling longer plans; in restrictive states, state law still controls. Many states restrict or ban STLDI entirely: California, Colorado, D.C., Massachusetts, New Jersey, New York, and several others either prohibit STLDI or limit terms to 3–6 months with no renewals. In those states, and in any state with a health insurance individual mandate (CA, D.C., MA, NJ, RI, VT), short-term plans are not a practical option regardless of the federal enforcement posture.

How It Affects You

If you're healthy and between jobs for a short period: A short-term health plan can provide genuinely useful catastrophic coverage at a fraction of ACA or COBRA costs — for the right person. A healthy 35-year-old in a permissive state can get STLDI coverage for $100–150/month vs. $400–600/month for an unsubsidized ACA Bronze plan and $800–1,200/month for COBRA continuation of typical employer coverage (which keeps your existing network but at full cost). A healthy 50-year-old faces even starker numbers: $200–300/month for STLDI vs. $800–1,200/month for an unsubsidized ACA Silver plan or $1,500–2,000/month for COBRA family coverage. Where to shop: ehealth.com, healthmarkets.com, and directly through insurers like National General Health, Pivot Health, or UnitedHealthcare (through their Golden Rule subsidiary) all sell STLDI. Before enrolling, read the Summary of Benefits and Coverage — specifically the exclusion list. Common STLDI exclusions include: any condition for which you received medical advice, diagnosis, care, or treatment in the prior 12–24 months (this is how most pre-existing conditions are excluded); maternity care; mental health services; prescription drugs (or high-cost drugs only); substance use disorder treatment; preventive care; and sometimes mental health parity. The coverage gap is real, but if you're genuinely healthy with no chronic conditions and primarily worried about an unexpected accident or acute illness during a short transition, the math can work. Don't use STLDI for more than the gap it's intended to cover.

If you have any pre-existing condition: Short-term plans are not a viable option — and applying anyway may leave you worse off than being uninsured. STLDI plans are exempt from the ACA's guaranteed issue and community rating rules, which means they can: (1) refuse to sell you a policy at all based on your health history, (2) issue you a policy but exclude all claims related to your pre-existing condition, or (3) issue a policy that appears to cover you but rescind (cancel retroactively) if you didn't disclose a condition they later discover. The exclusion language in most short-term plans reads something like: "No benefits are payable for any condition, disease, illness, or injury that manifested, existed, or was treated within 24 months prior to the effective date of coverage." In practice this catches: controlled chronic conditions like diabetes, hypertension, and asthma even if stable; cancer that is in remission; prior back pain, knee injuries, or joint conditions; depression, anxiety, or any prior mental health diagnosis; and sometimes even documented symptoms that were never formally diagnosed. If you have any of these, your options are the ACA marketplace (guaranteed issue, cannot be denied), Medicaid (if income-eligible), or COBRA (keeps your employer plan, at full cost, for up to 18–36 months). Call healthcare.gov at 1-800-318-2596 to check marketplace options and whether a Special Enrollment Period applies to your job loss.

If you're unsubsidized on the ACA marketplace and considering switching to save money: The ACA's enhanced subsidies expired after 2025, and the 400% FPL cliff is back — above approximately $62,600 (single) or $128,600 (family of four), you pay the full unsubsidized premium. That means a 50-year-old earning $70,000 faces $900–1,400/month for an unsubsidized Silver plan in many markets. The temptation to switch to STLDI is real. The risk is not symmetric: the monthly savings of $600–1,000 evaporate immediately if you're diagnosed with cancer, need a hospital admission, or require surgery while on a short-term plan — a single overnight hospitalization that your STLDI excludes or doesn't cover can cost $25,000–100,000. A more targeted alternative: consider an ACA Bronze plan with an HSA, which typically runs $150–400/month less than Silver, qualifies for full ACA protections, and lets you build a pre-tax emergency fund. Or explore whether reducing income through 401(k) contributions ($24,500 limit in 2026) could drop you below the 400% FPL threshold. Before switching to STLDI, answer honestly: do you have any condition — including anything you've been seen for in the last 2–5 years — that could lead to a claim denial? If yes, STLDI is not a real insurance substitute.

If you're in a state that restricts or bans short-term plans — and the state individual mandate applies to you: Federal rules allow STLDI up to 3 months with renewals to 4 months total — but states can be more restrictive. California bans STLDI entirely and imposes a state individual mandate penalty of approximately $900/adult/year ($450/child) for gaps in minimum essential coverage. Massachusetts bans STLDI and assesses a mandate penalty up to $1,272/year per individual. New Jersey bans STLDI (no mandate penalty as of 2026). New York and D.C. ban STLDI (D.C. has a state mandate). Vermont limits STLDI to 3 months with no renewals. Colorado limits STLDI to 6 months maximum with no renewals. Rhode Island allows STLDI but has a state individual mandate with a penalty of approximately $695/adult/year for coverage gaps. In these states, your realistic options are ACA marketplace plans, Medicaid (if income-eligible), COBRA, or employer coverage. If you're in a mandate state with a gap in coverage, you may owe the penalty at tax time — calculate it before you decide: a $900 mandate penalty is real money, but it's still less than a year of unsubsidized ACA premiums for some income levels.

Implementing Regulations

• 26 CFR Part 54 — Excise tax requirements for group health plans (short-term limited duration insurance exclusion from ACA market reforms)
• 45 CFR Part 144 — Requirements relating to health insurance coverage (definition and duration limits for short-term plans)

Pending Legislation

• HR 6420 — Would amend title XXVII of the Public Health Service Act to define short-term limited duration insurance with new coverage standards. Status: Introduced.

Recent Developments

• Biden 4-month rule on the books, but federal enforcement suspended: The Biden administration's 2024 final rule (89 FR 23338) limiting STLDI to a 3-month initial term and 4-month total duration is still the codified federal standard. However, on August 7, 2025, DOL, HHS, and Treasury jointly announced they "do not intend to prioritize enforcement actions" against insurers failing to meet that definition, citing President Trump's February 19, 2025 executive order on deregulatory review. The agencies also said they will not penalize states that apply pre-2024 definitions. The administration has signaled a new rulemaking — likely restoring the pre-2024 ceiling of 364-day initial terms and renewals up to 36 months — with a target of finalization by end of 2026. As of April 2026 no replacement rule has been published in the Federal Register, so the 3/4-month limits remain technically in force but unenforced at the federal level. In practice, the binding constraint on STLDI in 2026 is state law: in restrictive states (CA, CO, DC, MA, NJ, NY, VT, etc.) you cannot buy long STLDI; in permissive states, insurers have resumed selling 6-month and 12-month products.
• State restrictions remain a patchwork: Federal rules set the ceiling; many states impose tighter limits. California, Colorado, D.C., Massachusetts, New Jersey, New York, and several other states either heavily restrict or prohibit short-term health plans entirely. If you're in one of these states, STLDI may not be available regardless of federal rules — you'll need to use the ACA marketplace or employer coverage.
• ACA subsidy cliff returning in 2026 makes STLDI more tempting — but more risky: With the ACA enhanced subsidies expired, marketplace premiums have risen for households above 400% FPL (~$62,000 single). The premium gap between STLDI (unsubsidized) and ACA plans (also unsubsidized above the cliff) is narrowing for healthy enrollees. But the coverage gap is not narrowing — short-term plans still legally exclude pre-existing conditions, mental health, maternity, prescription drugs, and other essential health benefits. The financial risk of a serious diagnosis while on a short-term plan remains unchanged.
• No individual mandate penalty — but state mandates exist: The federal individual mandate penalty is $0 since 2019, so there's no federal penalty for choosing STLDI over an ACA plan. However, California, D.C., Massachusetts, New Jersey, Rhode Island, and Vermont have state-level health insurance mandates with annual penalties. In those states, short-term plans (if available at all) do not satisfy the mandate.