States push short-term insurance as healthcare costs climb

Nov. 9—Earlier this year, Madison Harden-Stein and her colleagues at the Georgetown University Center on Health Insurance Reforms posed as consumers interested in buying insurance as part of a secret shopper study.

They found that insurance brokers and sales representatives often pushed short-term health insurance plans with limited coverage, and used misleading and inaccurate information to make them more appealing. The deceptive sales tactics made it difficult to make an informed decision about what they'd be signing up for.

"It was very confusing to understand what they were even marketing," said Harden-Stein, an assistant research professor.

But as insurance costs skyrocket for many, consumers could see more such plans in the coming year.

Conservative states are making it easier for insurance giants to sell cheap, short-term healthcare plans with limited coverage — potentially sticking buyers with thousands of dollars in unexpected medical bills.

The push follows a spike in Obamacare premiums after Republicans allowed federal subsidies to expire at the end of last year. Meanwhile, millions of people stand to lose Medicaid coverage in the coming year due to federal changes.

Some Republican state and federal officials are pitching the plans as a cheaper alternative to the comprehensive coverage sold on the marketplaces created under the Affordable Care Act.

Earlier this year, Mississippi Insurance Commissioner Mike Chaney announced he wanted to make short-term plans more accessible by offering them through a state-operated customer portal.

"The goal here is to give Mississippi consumers more choices," Chaney said in a September statement.

"We should not assume that every Mississippian has the same health insurance needs," he said. "Some people need comprehensive coverage with broad benefits and protections. Others may need a lower-cost option to bridge a temporary gap in coverage."

But critics call them "junk plans." They say shoppers may be drawn in by low premiums and copayments without fully understanding that they lack the consumer protections people have come to expect since the Affordable Care Act. The 2010 law created regulated health insurance markets and banned insurers from denying coverage, dropping policies, or charging higher rates to people with preexisting health conditions.

Short-term, limited duration health plans have been around for decades, intended as stopgap insurance for people between jobs or who are waiting for their employer-sponsored insurance to kick in. The plans usually have cheaper premiums and copayments, but cover fewer services.

They don't have to cover maternity care, mental health treatment or prescription drugs.

And insurers are allowed to drop a person's coverage due to preexisting conditions, or limit the amount paid out per service. They can charge higher premiums for certain people. Research has found some plans charge women up to 19% more than men for the same coverage, which isn't allowed under ACA-compliant plans.

Under these types of plans, people with chronic conditions like diabetes or high blood pressure, or who are pregnant, can't get coverage.

Restrictions on the plans have seesawed as the Obama and Biden administrations limited the plans to just a few months' duration and the Trump administration relaxed those rules.

Most recently, the Trump administration announced in August 2025 it would not enforce Biden-era rules that limited the duration of short-term plans to a few months, and encouraged states to do the same.

Shortly after, states including Arkansas and Oklahoma said they would allow insurers to sell short-term plans that last less than a year, and allow them to be renewed up to three years, greatly extending the "short-term" nature of the plans.

Consumer advocates say brokers and insurance agents have used misleading or outright false information to entice consumers into purchasing the plans, which later surprised them with thousands of dollars in medical bills.

And while these plans can be lucrative for insurers, critics warn they will drive up costs for everyone else.

Jennifer Snow, the national director of government relations and policy at the National Alliance on Mental Illness, said someone like her 18-year-old son, who does not have complex health needs, could be considered an ideal candidate for short-term insurance.

But "you need those healthier people in the overall market to balance out the risk of people who need a lot more healthcare in a given year." said Snow, who is also a consumer representative with the National Association of Insurance Commissioners.

Health insurance works by spreading healthcare expenses across a large group. If insurers divert healthier people into cheaper, short-term plans, that leaves sicker people who need more expensive care in the risk pool for the comprehensive plans, leading insurers to raise those rates to cover those costs.

And, she said, short-term plans rarely cover mental health care, even though about half of people will have a mental health condition over their lifetime — coverage for which usually isn't included in short-term plans.

"At the end of the day, we are all human," she said, "and we have healthcare needs that are going to be unpredictable."

Better than nothing?

Insurance giant UnitedHealthcare will begin offering a handful of short-term plans through Mississippi's state-run portal by early next year.

Those plans could benefit some of the 200,000 Mississippians who left the ACA marketplace in the past year, said Chaney, the insurance commissioner.

But that exodus from the ACA marketplace is largely the result of recent federal action.

Last year, the ACA saw its highest-ever enrollment of 24 million people, thanks to enhanced premium tax credits made available by the American Rescue Plan Act in 2021 and later extended through the end of 2025 by the Inflation Reduction Act.

Those subsidies significantly lowered the cost of Obamacare coverage — making it free or nearly free for some people with low incomes. But they were designed as a temporary pandemic-era measure, and the GOP-controlled Congress allowed them to expire at the end of last year.

As a result, premiums jumped. Then marketplace enrollment dropped by 13%, according to federal data, indicating rates were no longer affordable for many. For example, a 60-year-old couple with an annual income of $85,000 suddenly faced annual premiums of $22,600 this year, instead of the roughly $7,225 they paid with enhanced premium tax credits, according to an analysis from the Bipartisan Policy Center.

Already the share of uninsured, working-age adults is growing. Eleven percent of adults ages 19-64 now have no insurance, up from 8.9 percent just two years ago, according to a new analysis from the Commonwealth Fund, a health policy nonprofit.

Given these realities, some insurance is better than none at all, Chaney and other officials have said.

Short-term plans are currently sold in 36 states, according to the most recent analysis from KFF, a nonprofit health policy and research organization.

Five states ban them: California, Illinois, Massachusetts, New Jersey and New York. Nine other states, plus the District of Columbia, require they adhere to stricter consumer protection requirements, and no short-term plans are currently available in those states.

But in the states that allow them, more officials are exploring ways to expand access.

Tennessee lets insurers offer short-term plans on its state ACA marketplace, with some minimum coverage requirements. States including Alabama, Florida, Missouri and Ohio have passed laws in recent years that allow farm bureau health plans, similar to short-term insurance.

Experts expect cheaper ACA-alternative plans will proliferate, as the feds continue loosening restrictions.

'Skeevy marketing'

After a year-long investigation into short-term plans, a congressional committee released a report in 2020.

It found that most insurers yanked coverage if they determined an enrollee had a prior health condition or risk factors they should have disclosed when applying for the plan, and some insurers denied claims for people who developed previously undiagnosed medical conditions after enrollment.

Some states have tighter rules around deceptive marketing practices, said Harden-Stein.

"But it's a bit of a whack-a-mole situation," she said. "You can take down one group that has these skeevy marketing tactics, but they might pop up again under another business name. That's what makes the regulation of this difficult" without stricter federal rules like those in the ACA.

Short-term plans are lucrative for insurance companies, because by staying outside of ACA rules, they can pick and choose whom they insure and avoid roadblocks to denying coverage.

And while federal law generally allows insurers to only keep about 15-20 cents of every premium dollar collected for ACA-compliant plans, short-term plans have no such restrictions, meaning insurers can keep more of an enrollee's monthly premiums and pay less toward medical claims.

As healthcare costs rise and with little appetite at the federal level to increase financial help paying for it, experts expect to see short-term plans proliferate in the coming years as states relax their rules and more people settle for "better than nothing" health insurance.

But cheaper doesn't necessarily mean more affordable, Harden-Stein cautioned.

"It may not necessarily be the affordable option in the long run because it doesn't offer that comprehensive coverage."

Stateline reporter Anna Claire Vollers can be reached at [email protected].

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