The Trump administration on Wednesday issued a final rule that again allows insurers to sell short-term health plans that are valid for up to 12 months and allows enrollees to renew the plans for up to three years.
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 (ACA) 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.
HHS in February proposed a rule to again allow insurers to sell short-term health plans that are valid for up to 12 months. 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.
Final rule details
HHS on Wednesday finalized the rule, which allows insurers to once again sell short-term health plans that are valid for up to 364 days. In addition, the final rule allows U.S. residents to renew short-term health plans for up to 36 months.
Trump administration officials said the final rule requires insurers to tell consumers what services the short-term health plans will and will not cover, the Times reports. Randy Pate, a senior official at CMS, said the requirement is designed to ensure consumers are informed about the coverage they are purchasing.
The final rule takes effect in about two months, meaning insurers could sell the new short-term health plans before the end of 2018, the Times reports.
The final rule notes that states will retain the power to regulate short-term health plans. According to the Times, that means states are allowed to restrict the sales of short-term plans and require the plans to cover certain services. Some states have signaled that they plan to take such actions, the Times reports.
HHS said the final rule "will help increase choices for Americans faced with escalating premiums and dwindling options in the individual insurance market" under the ACA.
Pate said the administration estimates 600,000 U.S. residents will purchase short-term health plans under the final rule in 2019, with enrollment in such plans rising to 1.6 million by 2022. As a result, Pate said an estimated 200,000 U.S. residents will no longer enroll in exchange coverage. Pate said the number of U.S. residents shifting from exchange coverage to short-term health plans is expected to increase gross premiums for exchange plans by 1% in 2019, with net premiums decreasing by 6%.
Paul Spitalnic, CMS' chief actuary, estimated the premiums for short-term health plans under the final rule would be roughly half of the average premium for exchange plans. In particular, Spitalnic estimated that monthly premiums for short-term health plans in 2019 might average about $340, while the average monthly premium for 2019 exchange plans might be $620. More specifically, the administration estimated that monthly premiums for short-term health plans could be nearly one-third of the cost of a standard silver-level exchange plan for 2019. According to the administration, the monthly premium for a standard silver-level exchange plan costs an average of $481 for a 40-year-old nonsmoker, while the average monthly premium for a short-term health plan could cost $160 or less.
That said, HHS Secretary Alex Azar acknowledged the short-term health plans permitted under the final rule "aren't for everyone, but they can provide a much more affordable option for millions of the forgotten men and women left out by the current system." He said, "For many who've got pre-existing conditions or who have other health worries, the [ACA] plans might be right for them."
Trump said the short-term health plans permitted under the final rule could help millions of U.S. residents who do not need or want to enroll in comprehensive health coverage. Trump said the plans will offer "much less expensive health care at a much lower price."
Jeff Smedsrud, CEO of Pivot Health, said short-term health plans are a "rational decision" for some U.S. residents. "It's a way better alternative to not being insured," he said, though he added, "I don't think it's permanent coverage. You are constantly betting that for the rest of your life you won't have any health issues."
Physicians, hospitals, insurers, and consumers advocates raised concerns about the final rule, saying the short-term health plans would not provide adequate health coverage for individuals who develop serious conditions and could jeopardize the exchange market by pulling healthy people out of exchange plans.
Frederick Isasi, executive director of Families USA, said the final rule "giv[es] insurance companies the green light to sell meaningless health insurance to vulnerable families."
Chris Hansen, president of the American Cancer Society Cancer Action Network, said individuals who purchase the short-term health plans could develop cancer and then "face astronomical costs" that might force them to "forgo treatment entirely."
Erika Sward, an assistant vice president at the American Lung Association, said the final rule is "one more blow of an ax to stable state [exchanges]."
Mary Dwight, a senior vice president at the Cystic Fibrosis Foundation, said while short-term plans originally had been intended for individuals in need of temporary health care coverage, "[t]he new plans [under the final rule] will no longer be just transition coverage. They will be an alternative to comprehensive insurance. They will split the market into plans for healthy people and plans for sick people" (Pear, New York Times, 8/1; Porter, HealthLeaders Media, 8/1; Alonso-Zaldivar, AP/ABC News, 8/1; Goldstein, Washington Post, 8/1).
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