Why is short term health insurance cheaper than major medical?

Short term health plans generally have more affordable premiums than major medical plans because they are not subject to ACA provisions and provide less coverage. For example, short- term medical insurance has few or no preventive care benefits.

Short term health insurance plans are designed to provide benefits that help with medical bills resulting from unexpected illnesses and injuries.

In general, the more coverage you seek, whether through an ACA plan or a short term plan, the higher the premium you will pay.

Comparison of Short Term Health Insurance and Obamacare

What They Offer Short Term Medical Plans Major Medical
Coverage Type Temporary, catastrophic coverage Long-term, minimum essential coverage including the ACA’s 10 essential health benefits
Coverage Length 30-364 days (duration limits vary by state) Guaranteed Renewable
Premium Cost Typically less than an unsubsidized ACA plan; cost varies by plan selected Typically more than a short term health plan, but subsidies may reduce cost; cost varies by plan selected
Pre-Existing Conditions Not typically covered; dependent on plan selected Covered by law
Preventive Care Benefits Not typically covered; dependent on plan selected Covered by law
Enrollment Period Year-round enrollment; plans start as early as the day after your application is accepted During the annual open enrollment period, or a special enrollment period when eligible
Subsidies Available No Yes
Guaranteed Issue No Yes