On Tuesday, the U.S Departments of Health and Human Services (HHS), Labor and Treasury released a proposed rule that would expand the availability of short-term health insurance by allowing the purchase of plans providing coverage for up to 12 months. This follows an executive order President Trump signed in October, which instructed federal agencies to explore more access to association health plans, expanding short-term limited duration plans and changes to health reimbursement arrangements.
The maximum duration for short-term plans is presently less than three months, a change made by the Obama administration in October, 2016. The proposed rule would reverse this policy, and allow such plans to last long as 364 days. CMS suggested that the three-month limit “left policyholders with no coverage options if they developed a health condition during that time, as other short-term offerings may deny them coverage and they likely wouldn’t qualify for a special enrollment period to buy an ACA exchange plan.”
The proposed rule states that short-term plans “would be unlikely to include all the elements of ACA-compliant plans, such as the preexisting condition exclusion prohibition, coverage of essential health benefits without annual or lifetime dollar limits, preventive care, maternity and prescription drug coverage, rating restrictions and guaranteed renewability.”
The Administration argues that expanding access to short-term plans is increasingly important due to rising premiums. However, the insurance industry expressed concerns that if young and healthy people leave the individual market for short-term plans, it could contribute to an unbalanced risk pool. CMS itself states that the exodus of young and healthy exchange members could contribute to rising premiums within the ACA exchange markets -“if individual market single risk pools change as a result, it would result in an increase in premiums for the individuals remaining in those risk pools.”
However, according to a CMS fact sheet accompanying the proposed rule, short-term, limited-duration plans are generally more affordable than ACA-compliant plans. In the fourth quarter of 2016, a policy cost approximately $124 a month compared to $393 for an unsubsidized ACA-compliant plan. The Departments project that approximately 100,000 to 200,000 people would shift from an ACA-compliant individual market plan to short-term, limited-duration insurance in 2019; only about 10 percent of whom would be subsidy-eligible if they maintained their Exchange coverage.
Public comments on the proposed rule may be submitted by April 23, 2018. Comments can be submitted by mail or electronically at www.regulations.gov.
Proposed Rule https://www.federalregister.gov/public-inspection
CMS Fact Sheet