Short-Term Health Plans OKd

August 8, 2018

On August 1, the Trump Administration finalized a rule that expands access to health insurance policies while skirting many of the Affordable Care Act’s (ACA’s) regulations. The final rule would allow people to buy short-term, limited-duration health coverage that lasts up to 12 months and renew that coverage for a maximum period of 36 months.

The Trump Administration has prioritized expanding coverage options, arguing that the ACA severely eroded choice for individuals buying their own insurance. The move has been touted as a way to expand access to short-term insurance coverage in order to make healthcare coverage more affordable for people who have been priced out of the individual market.

However, after the administration issued the proposed rule to expand short-term limited-duration insurance back in February, many insurers, provider groups, and consumer advocates said plans could harm consumers who don’t understand the limitations of the coverage they are buying. Critics also argued that premiums in the individual market would rise as young, healthy people leave exchanges that need those young people to balance out the risk pool. The final rule largely does not address these concerns.

Meanwhile, in June, the Trump Administration finalized rules making it easier for small businesses and independent contractors to band together to offer association health plans (AHPs) that aren’t subject to the ACA’s coverage mandates. The moves stem from an executive order signed by President Donald Trump in October 2017— after congressional repeal efforts fell through — directing administration officials to overhaul regulations and allow more alternative offerings.

The new rules are a reversal of the Obama Administration’s efforts to limit short-term plans. The previous administration reduced the plans’ maximum length from one year to three months in the hope of steering more people into comprehensive ACA coverage. However, this new final rule restores the previous 12-month enrollment limit and will allow people to renew the coverage for up to 36 months. Short-term plans are not required to provide coverage for the “10 essential health benefits” other insurers must cover under the ACA. Thus, insurers can deny short-term coverage to people who have pre-existing conditions. They can refuse an applicant with a health condition or offer a policy that does not cover the condition specifically.

While the final rule would allow insurers to sell plans that last up to one year and allow those plans to be renewed for up to a period of three years, it does not require renewability. That will be left up to the insurer to decide whether it will allow consumers to renew their coverage without having to re-apply for a plan. Officials said the renewability provision was modeled after COBRA plans, which allow people who have left a job to purchase the same health insurance they had when working for that employer for up to 36 months in some cases.

As with AHPs, many worry that inexpensive short-term plans will siphon off healthier patients who feel confident they don’t need comprehensive coverage or who can’t afford full policies. That will leave individual and exchange insurers covering sicker, more costly patients without the benefit of healthier patients in the insurance-risk pool. The result may be much higher premiums for ACA-compliant health plans.

The Centers for Medicare & Medicaid Services (CMS), which oversees the ACA insurance marketplaces, expects about 600,000 additional people to enroll in short-term limited duration plans in 2019, with that figure reaching 1.6 million people by 2021 or 2022. It expects about 200,000 people to swap their individual market coverage for short-term insurance. It does not project a big impact on individual market premiums. The CMS said premiums for 2019 ACA exchange plans are projected to rise one percent, while net premiums would decrease 6 percent.

The new rules take effect in 60 days, before the next ACA enrollment season opens Nov. 1, though state regulators would still need to approve new plans.