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. Under current federal rules (fluctuating by administration), plans can last up to 364 days, extendable to a combined total of 36 months. Some states heavily restrict or ban short-term plans; others allow the maximum. The Biden administration capped terms at four months (later blocked by courts); the Trump administration restored longer terms. 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.
| Parameter | Value |
|---|---|
| Maximum initial term | Up to 364 days (federal rule; varies by state) |
| Maximum renewal | Up to 36 months total (federal; varies by state) |
| ACA protections | NOT required (pre-existing conditions can be excluded) |
| EHBs required | No |
| Premium tax credits | Not available |
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.
Federal rules currently allow initial STLDI terms up to 364 days, renewable to a combined total of 36 months — restored in 2025 after the Biden administration's 2024 rule capped plans at 4 months was reversed. But federal rules set a ceiling, not a floor: 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 federal rules.
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 ($23,500 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 364 days with renewals to 36 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 reversed — 36-month maximum restored: The Biden administration's 2024 final rule limiting short-term health plans to 4 months (with no renewals) was reversed by the Trump administration in 2025. The rule limiting STLDI duration was formally rescinded, restoring the ability to sell initial plans up to 364 days with renewals up to 36 months total — the same rules that applied before Biden. If you are shopping for short-term coverage in 2026, longer-duration plans are again available in states that permit them.
- 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.