The Trump administration eventually may allow such plans to last for more than a year.

Feb. 20—The Trump administration issued a proposed rule to roll back 2016 Obama administration rules that limit the duration of short-term health insurance plans to three months.

Allowing the sale of “short-term, limited-duration health insurance” to cover any period of less than 12 months aims to “provide additional options to Americans who cannot afford to pay the costs of soaring healthcare premiums or do not have access to healthcare choices that meet their needs under current law,” according to a release from the U.S. Department of Health and Human Services (HHS).

Such plans are generally much cheaper than Affordable Care Act (ACA)-compliant plans because they do not meet ACA coverage rules and can utilize underwriting that is barred by the ACA.

The administration said such plans are needed due to the doubling of premiums for ACA-compliant plans from 2013 to 2017 and the sharp decline in insurer options. A McKinsey & Co. analysis found the number of on-exchange carriers declined from a peak of 333 companies in 2015 to just 194 in 2018.

“In a market that is experiencing double-digit rate increases, allowing short-term, limited-duration insurance to cover longer periods gives Americans options and could be the difference between someone getting coverage or going without coverage at all,” said Seema Verma, administrator of the Centers for Medicare & Medicaid Services (CMS).

Some industry watchers saw the development as positive.

“Obamacare health insurance plans are unaffordable for many Americans, so the administration’s proposed rule provides much-needed relief,” said Doug Badger, visiting fellow at the conservative-leaning Heritage Foundation and a senior fellow at Galen Institute.

Others warned that reverting to the pre-2016 rules would severely damage the ACA marketplaces.

“Short-term insurance plans will cherry pick healthy people, leaving ACA-compliant plans to cover a sicker pool with higher premiums,” Larry Levitt, senior vice president for health reform at the liberal-leaning Kaiser Family Foundation (KFF), wrote in a tweet.

The rule also could have little overall effect.

“It’s not clear to me that this does anything other than create the possibility of some choices that might get a few more enrolled in some kind of coverage, at least initially. Further down the road it is harder to predict,” said Joe Antos, a resident scholar at the libertarian-leaning American Enterprise Institute.

The Obama rules limiting such plans were functionally ignored by some insurers, which structured three-month policies to automatically renew four times and effectively provide year-long coverage after implementation of the 2016 rules, investment research firm Hedgeye wrote in a research note.

Insurer View

Many insurers selling plans in ACA marketplaces have long opposed the short-term plans, and some had pushed the Obama administration to enact the 2016 limits.

Justine Handelman, senior vice president of policy and representation for the Blue Cross and Blue Shield Association (BCBSA), said in a written statement that her group is still studying the proposed rule.

“It’s important that state regulators are given clear authority to protect consumers by regulating these products and by making sure there is full disclosure of which health benefits are covered, and what services are excluded or limited, so people fully understand what they’re purchasing,” Handelman said. “We have long said that there also must be one set of rules that apply to all insurers within a state. Without a level playing field, instability in the markets will worsen and premiums for those purchasing comprehensive coverage will skyrocket.”

Insurer advocates and coverage proponents argued in a December 2017 letter to state insurance commissioners that short-term plans were among policies that “increase adverse selection in insurance markets that serve millions of individuals and employers.”

“We are concerned that this could create or expand alternative, parallel markets for health coverage, which would lead to higher premiums for consumers, particularly those with pre-existing conditions,” they wrote. “Further, these actions destabilize the health insurance markets that guarantee access to comprehensive health coverage regardless of health status.”

Such plans will likely be available in a limited number of states because insurers will have to build a knowledge base to sell them and then get approval to do so from state insurance commissioners, who are likely to block the plans in some states, Antos said.

Key Issue

A critical question is how many people would leave ACA plan coverage for short-term plans and, as a result, potentially destabilize the ACA marketplaces.

A KFF brief noted that the “number of short-term policies in effect today is not known.”

The administration estimated that in 2019, 100,000 to 200,000 enrollees in ACA pans would leave for short-term insurance coverage. Antos expected most new enrollees in short-term plans to previously have been uninsured.

But others expected a much bigger impact. For instance, Loren Adler, associate director of the Center for Health Policy at the liberal-leaning Brookings Institution, expected more than 1 million to switch to such plans.

Among the roughly 6.5 million in unsubsidized ACA-compliant plans, “a not insignificant portion of those are relatively healthy, and could get cheaper coverage through [short-term] plans,” Adler wrote in a tweet.

The rule also would retain Obama administration requirements that short-duration plans warn buyers that they have not met ACA coverage requirements and would be exposed to coverage-related penalties. That provision will be relevant even after the individual mandate’s scheduled repeal in 2019, Antos said, because several states are moving toward implementing their own mandates.

Another provision of the rule that caught the attention of industry watchers was its request for comments on allowing such short-term policies to extend beyond one year. The approach is likely a political one, Antos said, and aims to use comments in support of the idea to bolster a potential future regulation.

But Antos doubted many insurers would offer multi-year coverage because that approach is not industry practice and extends the risk for plans that instead could reset rates each year based on the extent of claims filed in the previous year.

“In terms of the practicality of insurance companies saying, ‘Oh great, let’s have five-year plans with no review of premiums for five years,’ I don’t think that is going to happen,” Antos said.

Rich Daly is a senior writer/editor in HFMA’s Washington, D.C., office. Follow Rich on Twitter: @rdalyhealthcare

Publication Date: Tuesday, February 20, 2018