STM Coverage
If you buy your own health insurance and want to keep monthly premiums down, Short-Term Medical plans may be worth considering. They are often used not only for brief coverage gaps, but also by self-employed and budget-conscious shoppers who want a lower-cost alternative to unsubsidized or expensive Marketplace coverage. Some carriers say STM or related products can last nearly three years in certain states, which makes them more than just a one-month stop-gap for some buyers.
The reason they often cost less is because STM plans do not have to follow all Affordable Care Act (ACA) rules. They are generally exempt from many ACA individual market protections and comprehensive coverage standards, which is why the plans can be cheaper but also less complete.
To enroll, you usually have to go through medical underwriting. The NAIC explains that STM plans are often medically underwritten, and insurance company materials commonly note that your application must be approved based on health information. This means STM plans can turn away applicants or exclude conditions that ACA plans must cover.
It is especially important to understand the exclusions. STM plans commonly limit or exclude pre-existing conditions, pregnancy and maternity care, routine preventive care, and mental health services, and they are not required to cover all the ACA’s essential health benefits. Many also impose a maximum benefit amount, and many policy brochures show examples of up to $1,000,000 per coverage period.
STMs also do not work like Marketplace coverage when it comes to subsidies. Marketplace premium assistance is tied to income, but off-Marketplace plans do not come with income-based premium tax credits, so your income generally does not lower the STM premium the way it might on the ACA Marketplace. On the flip side, you will never be penalized for earning more money than originally expected.
And unlike ACA plans, Short-Term Medical plans are usually available whenever you need it, without having to wait for any enrollment period. In other words, Open Enrollment does not apply to STMs.