Earlier this year, the Trump administration proposed rules to relax federal restrictions on short-term, limited duration insurance (short-term plans). The proposal responds to President Trump’s executive order directing the administration to expand the availability of short-term plans as an alternative to comprehensive insurance that complies with the Affordable Care Act (ACA).
Short-term plans were originally intended to fill temporary gaps in coverage. Because short-term products are not considered individual health insurance under federal law, they are not required to comply with the ACA’s market reforms and consumer protections, such as the requirement to cover preexisting conditions, or the prohibition on charging higher premiums based on health status and other risk factors. Under the Obama administration, short-term products were limited to three months, including any renewals. The Trump administration’s proposed rules would eliminate this restriction, allowing short-term plans to last up to 12 months, and allow renewals with insurer consent. For a more detailed description of the proposed rule, you can read our issue brief here.
After a 60-day comment period, the Departments of Health and Human Services (HHS), Labor (DOL) and Treasury received over 9,000 comments from individuals, organizations, and government officials. CHIR reviewed a sample of comments from various stakeholder groups, including major medical insurers, consumer groups, carriers and brokers selling short-term plans, and state officials. For the first blog in our series, we summarize comments from seven consumer and patient advocacy organizations:
Consumer and patient advocates were united in their opposition to expanding the availability of short-term plans, and urged the agencies to rescind the rule or delay implementation to protect vulnerable populations and consumers at large from inadequate coverage, discriminatory practices, and higher premiums and reduced plan choices through the ACA’s marketplaces. We summarize their comments on the potential impact of the rule below.
Discriminatory practices would harm consumer and patient populations
Consumer advocates were particularly troubled by the potential for widespread discrimination if short-term plans become a cheaper alternative to comprehensive health insurance. Short-term plans are not subject to the anti-discrimination provisions of the ACA. People with pre-existing health conditions and even people who fall into “high risk” categories, such as women and older adults, can be charged higher premiums or denied coverage altogether when applying for short-term plans.
The ACA made large strides in creating fair access to health insurance for women, sick people, and other vulnerable populations, and consumer and patient advocacy groups expressed that the resurgence of discriminatory health underwriting would be detrimental to this progress. NPWF noted that short-term carriers frequently charge women higher premiums, while gender rating is prohibited in the ACA-compliant market. AARP pointed out that the ACA’s limit on insurers’ ability to charge older people more than three times the premium of younger enrollees does not apply to short-term plans. They further noted that nearly half of Americans age 40-64 have preexisting conditions, for which they could be charged more or denied coverage outright.
Questioning the quality of coverage
Almost every consumer group in our sample voiced concern over the quality of coverage provided by short-term plans. Before the ACA, health plans routinely excluded coverage of essential health services. The ACA established a requirement for non-grandfathered plans sold to individuals and small businesses to cover ten Essential Health Benefit (EHB) categories, protecting access to comprehensive insurance and affordable care. Short-term plans, however, do not need to comply with this requirement.
Several organizations noted that expanding short-term products will lead to an influx of plans that are allowed to exclude coverage for services like maternity care, prescription drugs, mental health care, and preventive services. Consumer advocates disputed the proposed rule’s claim that consumers may be prone to switch from ACA-compliant plans to cheaper, less comprehensive coverage because they do not believe the comprehensive benefits are “worth their cost.” ACS-CAN cited a recent Kaiser Family Foundation poll that revealed 84% of respondents would prefer to enroll in their individual market plan rather than switching to a short-term plan. And CBPP pointed out that the aggressive marketing tactics of companies selling short-term plans may lead consumers to purchase coverage that has far fewer benefits and protections than they are led to believe.
Financial risks for consumers
While the sticker price of a short-term plan is typically lower than an ACA-compliant plan, many comments focused on the financial risks they pose. Because the cost of health care is too high for most people to pay for services entirely out of pocket, health insurance acts as a protection against financial hardship. The ACA standardized this protection in the individual market by setting an annual maximum on out-of-pocket expenditures, preventing insurers from imposing benefit caps, and creating standards for the proportion of premiums that insurers have to pay towards medical claims. Short-term plans do not have to comply with these requirements, and due to their numerous coverage exclusions, consumers can be left holding the bag for huge medical bills. For example, Community Catalyst pointed out that many short-term plans impose lifetime and annual limits on benefits, a practice prohibited by the ACA. This could lead to “woefully inadequate” coverage and pose substantial financial risks for consumers.
CBPP noted that short-term plans have a history of consumer complaints and legal disputes due to the fact that insurers deny claims for preexisting medical problems, citing one case in which a consumer was left with $400,000 in medical bills after undergoing treatment for breast cancer, a condition she was unaware of when she purchased the policy. Young Invincibles, an organization that advocates for young adults, argued that the lower up-front costs of short-term plans are likely to attract consumers with low health insurance literacy, who will flock to the cheaper plans despite their lack of financial protections. In addition to these risks, ACS-CAN cautioned that short-term plans are exempt from medical loss ratio (MLR) requirements, allowing insurers to spend fewer premium dollars on medical claims. They argue that expanding these products would lead to higher profit margins for insurers at the price of higher out-of-pocket costs for consumers.
Threats to the ACA-compliant market
In addition to consequences for consumers who enroll in short-term plans, comments highlighted the risks for the individual market if the rule is finalized as written, allowing short-term plans to proliferate. Several groups argued that increasing the availability of short-term plans will lead to an “uneven playing field,” causing healthier individuals who can pass medical underwriting to leave the ACA-compliant market, while sicker individuals or those who want more comprehensive coverage will have to stay put, leading to adverse selection. ACS-CAN pointed out that, as the proposed rule states, “individual market issuers could experience higher than expected costs of care and suffer financial losses, which might prompt them to leave the individual market,” leading to dwindling plan selections and rising premiums for consumers. CBPP noted that changing the federal definition of short-term plans will likely lead to higher rates in 2019 by adding even more uncertainty that insurers must account for when setting individual market premiums for next year.
Definition of “short-term” inconsistent with current federal law
While large portions of consumer advocates’ comments focused on the problems with short-term plans themselves, many of the organizations also questioned the legality of the proposed rule’s definition of “short-term.” Families USA and Young Invincibles noted that allowing short-term plans to last almost a full year is contrary to statutory language that was meant to restrict such coverage to limited time periods, rather than creating a loophole to permit plans to last just under 12 months (364 days). The organizations also argued that the ACA’s reforms, which set certain standards for coverage, cannot serve their proper function if this expansion of short-term plans springs a leak in the risk pool, leading to a mass exodus of healthy consumers towards non-ACA-compliant plans. CBPP pointed out that prior to the ACA, short-term plans served an important function for someone between jobs; however, with the advent of the ACA, individuals who lose employer-based coverage can sign up for a plan through a special enrollment period without having to undergo discriminatory medical underwriting. They contend that this makes the 364-day limit inappropriate under the current federal laws and regulations.
A Note on our Methodology
This blog is intended to provide a summary of some of the comments submitted by a specific stakeholder group: consumer and patient advocacy organizations. Comments were selected to provide a range of perspectives, including organizations that focus on specific patient and consumer populations. This is not intended to be a comprehensive report of all comments from consumer groups on every proposal in the short-term, limited duration insurance proposed rule. Future posts in this blog series will summarize comments from major medical insurers, carriers and brokers selling short-term plans, state-based marketplaces and state insurance regulators. For more stakeholder comments, visit http://regulations.gov.