With medical costs continuing to climb, many Americans are scrambling for ways to manage higher health care bills.
When the enhanced Affordable Care Act (ACA) subsidies expire on January 1, 2026, premiums are expected to rise for millions of people. Even workers who get insurance through their employers could see their premiums increase by as much as 6.7% next year (1).
With no obvious long-term fix on the horizon, the Trump administration has returned to a strategy it first floated back in 2017: broadening access to “short-term” health insurance plans. Not everyone thinks that’s good news.
“These policies are a horrible idea,” said Ken Swindle, an Arkansas-based attorney, according to The Washington Post (2). “People think they’re getting comprehensive medical coverage, but they’re not, and they often don’t realize that until it’s too late.”
What exactly are short-term health insurance plans?
Short-term health insurance — formally known as “short-term limited duration insurance” — consists of temporary policies sold by private insurers. They’re designed to bridge gaps in coverage, such as when someone is between jobs or waiting for employer coverage or Medicare to kick in.
These plans were defined by federal regulation in the late 1990s as coverage that ends in less than 12 months from the original effective date, including any extensions the policyholder might request. The goal was to make health coverage more portable so that workers didn’t feel locked into a job just to keep their insurance (3).
Because short-term plans are excluded from the federal definition of individual health insurance, they do not have to follow ACA rules on essential health benefits, preexisting conditions, or annual and lifetime coverage limits (4).
In 2018, the Trump administration issued an executive order that loosened the rules around short-term policies and directed agencies to expand access. Plans that had previously been capped at four months were allowed to last for up to three years.
At that time, officials argued that ACA-compliant plans had become too costly for many people who don’t qualify for subsidies and said extended short-term coverage would offer cheaper options and more consumer choice.
“President Trump is bringing more affordable insurance options back to the market,” said Alex Azar, Trump’s former health secretary during the president’s first term, according to The Washington Post (2). “These plans aren’t for everyone, but they can provide a much more affordable option for millions of the forgotten men and women left out by the current system.”
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Why are short-term plans controversial?
Most types of insurance work on the same basic principle: many people pay into a shared pool, but only a small share will use significant benefits. When the ACA was passed, it included an “individual mandate” that required most people — especially younger, healthier individuals — to maintain coverage or pay a penalty (5). That helped keep the insurance pool broad and premiums more stable.
The individual mandate was originally a conservative policy concept promoted by the Heritage Foundation as a way to preserve private insurance instead of shifting to a government-run system (6). But once it became associated with “Obamacare,” it turned into a political lightning rod. After failing to repeal the ACA in 2017, Republicans and President Trump effectively gutted the mandate by reducing the penalty for going without coverage to zero dollars.
In 2024, the Biden administration moved to tighten rules around short-term insurance again, limiting policies to a maximum of four months (including renewals) and requiring clearer disclosures about what these plans do not cover. The current Trump administration has rolled back those limits and returned to its 2018 approach: promoting expanded short-term insurance as a tool to help bring down costs.
Short-term plans are usually cheaper than ACA-compliant coverage. On average, they cost about half as much as a plan sold on the ACA marketplaces. As The Washington Post notes, a 40-year-old nonsmoker in Florida might pay roughly $500 a month for an ACA plan but about $320 a month for a short-term policy.
The lower price comes with trade-offs. Short-term insurance is not required to cover preexisting conditions or many core health needs, such as mental health care or maternity care (2). Critics say the plans are so “full of holes” that five states — including New York and California — have banned insurers from selling them altogether.
“Even some major insurers have questioned whether relying on the short-term plans is a good idea, warning that many consumers could mistake them for comprehensive coverage,” The Washington Post reports. “The Biden administration referred to them as ‘junk’ plans.”
What can consumers realistically do?
Individual consumers have limited power to control the broader forces driving health care inflation. Beyond voting for lawmakers who prioritize realistic health policy solutions, the main options are about managing personal risk and costs as smartly as possible.
Younger, healthier people — especially those who haven’t started a family — may want to consider a high-deductible health plan (HDHP) paired with a health savings account (HSA). These accounts offer three major tax advantages: contributions are tax-deductible, the money can be invested and grow tax-free, and withdrawals are tax-free when used for qualified medical expenses, including deductibles and certain health care costs (7).
HDHPs must meet thresholds set by the IRS (8). For 2025, that means minimum deductibles “not less than $1,700 for self-only coverage or $3,400 for family coverage, and for which the annual out-of-pocket expenses (deductibles, co-payments, and other amounts, but not premiums) do not exceed $8,500 for self-only coverage or $17,000 for family coverage.”
Those are steep out-of-pocket limits. But if you’re relatively young, in good health, and don’t have children, an HDHP paired with an HSA can make financial sense — especially if you’re a higher earner.
If that doesn’t describe you, your employer’s tiered health plan is often the best starting point. Take time to think honestly about your health risks:
- Are you mainly worried about rare, catastrophic events like a serious accident?
- Or do you have ongoing conditions, such as hypertension or diabetes, that require regular care and medications?
Your company’s benefits or plan administrator can help you compare tiers and pick the level of coverage that best matches your situation.
For those without access to employer coverage — such as self-employed individuals or gig workers — state and federal ACA exchanges remain an important resource, even as prices rise. Short-term plans may serve a purpose for truly temporary gaps, but they’re not designed to be a long-term substitute for comprehensive health insurance.
