Why cheap health insurance plans can backfire for Americans seeking lower healthcare costs

Health insurance premiums have been steadily increasing for many Americans since 2025, leading some to abandon coverage altogether. With the prospect of further premium hikes and the introduction of work requirements for Medicaid in January 2027, many individuals are in search of more affordable health insurance options. As health economists who specialize in public policy, we understand the challenges faced by those without employer-sponsored health benefits.

While low-cost alternatives may seem appealing, they often come with significant risks and limitations.

Historically, individuals without employer-sponsored coverage faced limited insurance options. Prior to the Affordable Care Act (ACA) in 2014, insurers could charge higher premiums based on health status, exclude preexisting conditions, and deny coverage altogether. The ACA eradicated this discrimination, established a minimum standard of 10 essential benefits, and required plans to cover preventive care at no additional cost.

Subsidies based on income were also introduced to make coverage more accessible through online marketplaces.

However, low-cost plans outside of ACA marketplaces have persisted. These are essentially remnants of the pre-ACA health insurance landscape. When evaluating health insurance plans, consumers must consider the trade-offs between premium costs, coverage comprehensiveness, and provider networks. Short-term, limited-duration plans, designed for temporary coverage gaps, can be more affordable due to exemptions from ACA rules.

They often do not cover maternity care and may cap annual out-of-pocket expenses, potentially leaving policyholders responsible for substantial costs. These plans can also deny coverage based on health status, making them less suitable for individuals with preexisting conditions.

Healthcare sharing ministries and farm bureau plans are other seemingly low-cost alternatives. These plans often mimic insurance company websites but are not regulated as insurance providers. They may exclude coverage for preexisting conditions, limit the dollar amount they will pay out, and deny coverage based on health history.

Similarly, farm bureau plans, available in 14 states, are restricted to members of the state's farm bureau and are not subject to federal or state insurance regulations. While these options can be cheaper, they may lack the comprehensive coverage and consumer protections of ACA marketplace plans.

For many consumers, marketplace coverage remains the best option, especially if income-based subsidies can be utilized. However, for those considering alternatives, it is crucial to thoroughly review the summary of benefits and coverage. This summary provides plain-language details about what is covered, any limitations, and the associated costs. By carefully assessing these factors, individuals can make informed decisions and avoid potential pitfalls associated with less regulated health insurance options.