Plans with cheaper premiums are risky business for Americans seeking lower healthcare costs

Healthcare costs are a major concern for Americans, and health insurance premiums are a primary fuel for that anxiety.

Shrinking federal subsidies for Affordable Care Act plans led to large premium increases for millions of Americans in 2025, causing many people to drop coverage. With premiums expected to rise further and Medicaid work requirements set to begin in January 2027, many Americans are left scrambling for affordable options.

We are health economists who study public policies aimed at expanding health insurance coverage. When it comes to our own health insurance, we are fortunate: We are among the roughly 160 million Americans who receive coverage through their employers.

But if you don’t work for a large employer that provides health benefits, finding coverage for your family can be confusing and, increasingly, expensive.

People looking for low-cost alternatives have no doubt encountered several options. They may look appealing and, in some cases, may be appropriate, but they can also carry real risks.

Navigating trade-offs

Historically, people who didn’t have access to employer-sponsored coverage had limited health insurance options. Before the Affordable Care Act went into effect in 2014, insurers could charge you a higher premium based on your health status, exclude coverage for preexisting medical conditions, or deny you coverage altogether.

The ACA eliminated this kind of discrimination, established a minimum standard of 10 essential benefits that health insurance plans had to cover, and required plans to fully cover the cost of preventive care. It also introduced income-based subsidies that could be used to purchase coverage in newly established online marketplaces.

Low-cost plans that aren’t available through ACA marketplaces are essentially vestiges of the pre-ACA health insurance landscape.

Regardless of where you get coverage, choosing health insurance involves trade-offs. The more you pay in premiums, the more comprehensive your coverage will be in terms of how much you must pay when you need care and the breadth of the network of covered providers.

Some trade-offs are clear when you choose a plan, but some lower-cost options may have limitations that are not immediately obvious.

Less costly short-term plans

As their name suggests, short-term, limited-duration plans are designed for people with temporary gaps in coverage, such as those who are between jobs or months away from qualifying for Medicare. These plans, which can be purchased for periods of up to six months, tend to be cheaper than marketplace coverage for two reasons.

First, because they are not subject to ACA rules, they may not provide the full range of essential health benefits. Short-term, limited-duration plans often do not cover maternity care and commonly don’t have an annual limit on out-of-pocket costs. In fact, these plans may cap how much they will pay in a year, leaving policyholders stuck with large, unexpected expenses.

Second, unlike plans offered through the ACA marketplaces, short-term, limited-duration plans are allowed to deny coverage based on your health status. Screening out higher-cost consumers reduces premiums, but if you are not in perfect health, you may not be able to find an insurer that will sell you one of these more limited plans.

Because of a concern that they destabilize the market by siphoning off healthy consumers, short-term, limited-duration plans are banned in five states.

Alternatives that look like insurance

Another seemingly affordable option is healthcare sharing ministries, arrangements through which consumers with common religious beliefs agree to share medical expenses. Their websites resemble those of health insurance companies – for example, they often present different plan options offering different levels of benefits – but they avoid using standard insurance terms like “premium” or “deductible” because these offerings are not insurance.

Because they are not regulated as insurance companies, healthcare sharing ministries are not subject to consumer protections or other state or federal requirements. There is also no guarantee that the ministry will cover your medical expenses when you submit a claim.

Like short-term, limited-duration plans, healthcare sharing ministries may deny coverage based on your health history, exclude coverage for preexisting conditions and put a limit on the dollar amount they will pay in benefits.

Another lower-cost option available in 14 states is health coverage offered by a farm bureau. These plans are similar to healthcare sharing ministries in that they are limited to a certain group of people – to enroll, you must be a member of the state’s farm bureau, though that does not mean you necessarily have to work in agriculture.

These plans are also not subject to federal or state insurance regulations. This means that, like short-term, limited-duration plans, they can offer lower prices by not offering certain benefits required by the ACA and by screening out high-cost consumers. Unlike short-term, limited-duration plans, there is no limit on how long you can hold farm bureau coverage.

What should you do?

Although the cost of marketplace coverage has increased dramatically since 2025, for many consumers who need coverage for more than six months, it remains the best option.

If you are single with an annual income below US$64,000, a couple with an annual income below $87,000, or a family of four with an annual income less than $132,000, you should still be eligible for a premium subsidy. And you will know that the plan you are purchasing is real insurance that covers a standard set of benefits and is subject to robust consumer protections.

If you are considering an alternative to marketplace coverage, there are a few things you should do to protect yourself:

Make sure you ask for a summary of benefits and coverage. This is a plain language summary of a health plan’s benefits and coverage with examples of how much the plan would cover for two specific conditions – diabetes and childbirth. Insurers and employers who offer coverage are required to provide this document to anyone applying for coverage. If they cannot provide one, what they are selling may not actually be insurance.

If they do provide a summary of benefits and coverage, read it carefully. As we noted earlier, one reason some options might be less expensive than a marketplace plan is that they provide much less coverage. Don’t assume that they cover all the benefits you would expect from a health insurance plan, or that they will cover the full cost of the care you receive.

Finally, never enter your phone number into a “do you need insurance” website. This area is rife with fraud, including multiple cases in which telemarketers misled consumers into paying hundreds of dollars per month to purchase sham health insurance.

Health insurance is expensive because healthcare is expensive – which means that consumers have to make difficult trade-offs. There is no easy answer, but beware of options that look too good to be true. They very well might be.

Thomas Buchmueller is a Non-Resident Senior Fellow at the Brookings Institution. He was part of a team that received state funding from 2015 to 2022 to evaluate the Healthy Michigan Plan, Michigan's ACA Medicaid expansion. In 2011-2012 he was the Senior Health Economist at the White House Council of Economic Advisers and from 2023-2025 he was Deputy Assistant Secretary for Planning and Evaluation at the U.S. Department of Health and Human Services.

Helen Levy was part of a team that received state funding from 2015 to 2022 to evaluate the Healthy Michigan Plan, Michigan's ACA Medicaid expansion. She served as a Senior Economist at the White House Council of Economic Advisers in 2010-2011.