Health insurance can be confusing, especially if you’re young, healthy, and trying to save money. Two options often come up for people in this situation: short-term medical insurance and catastrophic health insurance. Both can look appealing at first glance because of their low premiums, but they serve very different purposes. Choosing the wrong one could leave you with major gaps in coverage and unexpected bills.
What Are These Plans?
Catastrophic Insurance
Catastrophic plans follow the rules of the Affordable Care Act (ACA), meaning they cover essential health benefits like hospital care, preventive services, and prescriptions. The trade-off is that they come with very high deductibles—often over $9,000. Monthly premiums are low, but you’ll pay most costs out of pocket until you reach that deductible.
These plans are only available to people under 30, or to adults who qualify for a hardship exemption. They’re meant as protection against serious accidents or major illnesses rather than everyday healthcare needs.
Short-Term Medical Insurance
Short-term medical (STM) policies are temporary coverage options sold outside the ACA marketplace. Depending on the state, they can last a few months up to a year, sometimes with renewal options.
They’re generally inexpensive, but the coverage is limited. Most do not include preexisting conditions, and many exclude services like maternity care, mental health, or prescription drugs. People often choose them during a transition period—such as between jobs, waiting for employer coverage, or after missing the ACA open enrollment deadline.
Key Differences
| Feature | Catastrophic Plan | Short-Term Medical Plan |
|---|---|---|
| Eligibility | Under 30 or hardship exemption | Available to applicants who meet health requirements |
| Regulation | ACA-compliant | Non-ACA, varies by state |
| Premiums | Low | Low to moderate |
| Deductibles | Very high (often $9,000+) | Can be lower, but benefits are limited |
| Preexisting Conditions | Covered | Not covered |
| Essential Benefits | Included (per ACA rules) | Often excluded |
| Best For | Young adults seeking ACA protections at the lowest cost | People needing short-term, flexible coverage |
Who Might Benefit From Each Plan?
Catastrophic Plans Work Well For:
- Adults under 30 who rarely use medical services but want protection for emergencies
- People with a hardship exemption who can’t afford higher-level ACA plans
- Anyone who wants insurance that satisfies ACA requirements while keeping premiums low
Short-Term Plans Work Well For:
- People between jobs or waiting for new employer benefits to begin
- Those who missed ACA open enrollment and need temporary coverage
- Adults who don’t qualify for ACA subsidies and want lower monthly costs
- Individuals who mainly want protection in case of sudden accidents or hospital stays
Common Questions
Do catastrophic plans include preventive care?
Yes. Preventive services like vaccines and annual checkups are free under ACA rules, even before you meet your deductible.
Can I keep renewing a short-term plan?
It depends on your state. Some allow renewals for up to three years, while others limit them. Insurers can also deny renewal if you develop new health conditions.
Which is more affordable overall?
Short-term plans may look cheaper month-to-month, but catastrophic coverage could save you more if you face a serious medical event, since it includes all ACA-required benefits.
Do catastrophic plans pay for prescriptions?
Yes, but you’ll usually cover the full cost until your deductible is met.
Tips for Deciding
- Check your eligibility: If you’re over 30 without a hardship exemption, catastrophic plans won’t be an option.
- Compare total costs: Don’t just look at monthly premiums—factor in deductibles and out-of-pocket expenses.
- Think about your health history: If you have preexisting conditions, short-term coverage won’t work.
- Consider ACA subsidies: Many people qualify for premium tax credits, which can make bronze or silver plans cheaper than either catastrophic or short-term policies.
- Assess your risk tolerance: Catastrophic plans are a safeguard for major health events, while short-term policies are meant for short gaps in coverage.
The Bottom Line
Short-term and catastrophic insurance both have their place, but they’re not long-term solutions. Catastrophic plans are ideal for younger adults who want ACA protections and low premiums, while short-term plans make sense for those in transition who need budget-friendly, temporary coverage.
Before committing, always compare these options with ACA bronze or silver plans—especially if you qualify for subsidies. In many cases, a standard marketplace plan may offer more reliable protection for the same or even lower cost.
