February 20, 2018

Trump admin plans to expand short-term health plans that are exempt from ACA requirements

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    HHS on Tuesday released a proposed rule that would again allow insurers to sell short-term health plans that are valid for up to 12 months.

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    Background on short-term health plans

    CMS in a fact sheet said short-term health plans are "designed to fill temporary gaps in coverage when an individual is transitioning from one plan or coverage to another form of coverage." The plans are not required to comply with certain Affordable Care Act requirements, such as provisions that bar insurers from denying an individual coverage or charging him or her higher premiums based on pre-existing medical conditions. The plans also do not have to comply with the ACA's minimum coverage requirements.

    Prior to 2016, insurers were able to sell short-term plans that were valid for up to 364 days. However, HHS under former President Barack Obama shortened the use of such plans to just three months in an effort to curtail their use and encourage individuals to purchase ACA-compliant coverage, Vox reports.

    Proposed rule details

    HHS said it issued the proposed rule in direct response to an executive order President Trump signed in October 2017 that directs federal agencies to consider changes that would loosen federal requirements on association health plans, short-term health plans, and employer-funded reimbursement accounts.

    Under the proposed rule, HHS would again allow insurers to sell short-term health plans that are valid for up to one year. HHS in a release said the change would "provide additional options to Americans who cannot afford to pay the costs of soaring health care premiums or do not have access to health care choices that meet their needs under current law."

    According to Reuters, the federal government has estimated that between 100,000 and 200,000 U.S. residents could switch from exchange plans to short-term health plans in 2019 if the proposed rule is finalized.

    HHS said the proposed rule includes provisions intended "to help consumers who purchase short-term, limited-duration policies understand the coverage they are getting." Under the proposed rule, insurers would be required to include in contracts and application materials for short-term health plans a notice stating that the plans are "not required to comply with ACA provisions."

    In addition, CMS in the proposed rule is seeking comment on whether to allow U.S. residents to renew short-term health plans—a move that Kaiser Health News reports marks a change from past practice.

    CMS said it will accept comments on the proposed rule for the next 60 days.

    Comments

    CMS Administrator Seema Verma in the release said, "Americans who find themselves between jobs or simply can't afford coverage because prices are too high will be helped by" Trump's executive order and the proposed rule. She added, "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."

    Christopher Condeluci, a benefits attorney who also served as tax counsel to the U.S. Senate Finance Committee, said the proposed changes "simply rever[t] back to where the short-term plan rules were prior to Obama limiting those plans."

    But some experts have warned that increasing individuals' access to short-term health plans could have negative consequences for the individual health insurance market.

    For instance, Kevin Lucia, a research professor and project director at Georgetown University's Health Policy Institute, said the move would "undermine the individual market risk pool" and drive up premiums by encouraging more young, healthy adults to leave the exchange market. Lucia predicted that over time, the exchange market would largely consist of individuals who qualify for federal subsidies and sicker adults who either need more comprehensive coverage or are denied a short-term health plan.

    Health care consultant Robert Laszewski said, "The Trump administration will bring rates down substantially for healthy people, but woe unto those who get a condition and have to go back into Obamacare." He added, "We're going to have two different markets, a Wild West frontier called short-term medical … and a high-risk pool called Obamacare."

    Further, experts have cautioned that individuals enrolled in short-term health plans might not have the coverage they need. According to CNN Money, Karen Pollitz, a senior fellow at KFF, in a recent policy brief wrote, "People who buy short-term policies today in order to reduce their monthly premiums take a risk that, if they do need medical care, they could be left with uncovered bills and/or find themselves uninsurable under such plans in the future" (Luhby, CNN Money, 2/20; CMS fact sheet, 2/20; HHS release, 2/20; Leonard, Washington Examiner, 2/20; Humer, Reuters, 2/20; Sullivan, The Hill, 2/20; Scott, Vox, 2/20; Appleby, Kaiser Health News, 2/20).

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