You just lost your job.
The COBRA letter arrives.
$780 a month.
Your heart sinks.
Then you see an ad.
“Short term health insurance. From $49/month.”
Cheap.
That’s what they tell you.
Cheap.
But here is the question nobody answers straight.
What does “average cost” actually mean for you?
Not for a 25-year-old in Ohio.
Not for a retiree in Texas.
For you.
I’ve been a licensed broker for fifteen years.
Let me walk you through the real numbers.
The catch.
And the trap that most people only discover after they file a claim.
The number you see vs. the number you pay
Every carrier advertises a low average.
$89.
$127.
$163.
Those are not lies.
They are just… incomplete.
Because short term health insurance is not ACA-compliant.
That means they can price you based on your health.
Your age.
Your zip code.
Even your cholesterol.
So the “average cost” they publish is an average of approved applicants.
Not the ones with high blood pressure.
Not the ones over 55.
Here is what I actually see in my office.
A 40-year-old in Florida,non-smoker, no pre-existing conditions: $112/month for a 6-month plan with a $5,000 deductible.
Same person in California?
Not available.
California banned most short term plans.
A 55-year-old in Texas with mild hypertension: $267/month.
Same plan.
Same deductible.
Double the price.
Why?
Because the carrier knows you are more likely to need care.
And short term plans have no obligation to cover you.
None.
The silent killer: elimination period
You see a plan for $94/month.
Looks great.
Then you read the fine print.
Sixty-day elimination period.
That means you pay for two months before the plan pays a dime.
Two months of premiums down the drain.
Need surgery on day 45?
Sorry.
You are still in the elimination window.
Pay out of pocket.
Now that $94 plan cost you $94 plus a $15,000 hospital bill.
Average cost suddenly not so average.
Here is where things get tricky.
You can shorten the elimination period.
Pick 30 days.
Or 15.
Or zero.
But each step down raises your premium.
Sometimes by 40%.
A $94 plan becomes $131.
Just to start coverage on day one.
That is the game.
Carrier A offers $89 with 60 days.
Carrier B offers $120 with 0 days.
Which one is actually cheaper?
Do the math.
If you expect to use the plan within the first two months, Carrier A is a disaster.
If you are just covering a catastrophic event in month three, maybe it works.
But you don’t know when you will fall.
Nobody does.
The tax twist nobody tells you about
You think you are saving money.
But here is the kicker.
With an employer plan, your premium comes out pre-tax.
That $500 monthly premium only reduces your take-home by about $350, depending on your bracket.
With short term insurance?
You pay with after-tax dollars.
Every single penny.
So that $112 plan actually costs you the full $112 in lost spending power.
Compare to an ACA plan.
If you qualify for a subsidy, your after-tax cost could be $150.
But the coverage is real.
Maternity.
Mental health.
Prescriptions.
Short term plans cover none of that.
Not really.
They cover “emergencies” as they define them.
And here is another tax trap.
Some brokers will tell you to write off short term premiums as a self-employed health insurance deduction.
Don’t do it.
IRS Section 162(l) requires the plan to be established under your business.
But short term plans are not “health insurance” under the ACA definition.
Audit risk is real.
I have seen two clients get penalized.
Not worth it.
Three mistakes I see over and over
Mistake one: “I’ll just roll the dice because I’m healthy.”
Healthy until you are not.
Appendicitis doesn’t check your gym attendance.
A $25,000 surgery will wipe out your savings.
Short term plans have annual limits.
Old ones capped at $1 million.
Newer ones?
Many have no cap.
But they also have per-incident limits.
Read your contract.
That $50,000 ambulance airlift might only be covered up to $10,000.
Mistake two: “It renews forever.”
No.
Most short term plans have a maximum duration.
Three months.
Six.
Twelve in some states.
After that, you reapply.
But if you had a claim during the first term?
The carrier can deny renewal.
Or raise your rate by 300%.
Or exclude the body part you already used.
Happens every week.
Mistake three: “It’s the same as COBRA but cheaper.”
COBRA keeps your exact same plan.
Same doctors.
Same coverage for pre-existing conditions.
Same out-of-pocket max.
Short term gives you none of that.
You save $200 a month.
Then you break your leg.
The plan pays 80% up to $10,000.
Your bill is $40,000.
You owe $30,000.
Where is the saving now?
So what should you do?
Here is my honest advice after fifteen years.
Do not buy short term health insurance unless you have two things.
First, a backup plan.
Cash in the bank.
At least $20,000.
Or a credit card with a high limit.
Or a family member who can lend you money.
Second, a hard stop date.
Know exactly when you will get real coverage.
A new job with benefits.
An ACA plan during open enrollment.
Medicaid if your income dropped.
Short term is a bridge.
A flimsy bridge.
Walk fast.
Do not live on it.
The average cost question one more time
The national average for a short term plan is between $100 and $200 per month for a 40-year-old.
But that number is useless.
Because your real cost is not the premium.
Your real cost is the premium plus everything the plan does not pay.
Plus the tax inefficiency.
Plus the risk of being denied renewal.
Plus the sleepless nights wondering if that chest pain is “covered.”
I have sat across from too many people who saved $50 a month on premiums and lost $50,000 on a claim.
That is the true average cost of short term health insurance.
A gamble you might lose.
So ask yourself.
What is peace of mind worth to you?
Because cheap insurance is not cheap.
It is just deferred expensive.