New Rules Pending on Short-Term Health Plans: Impacts for Consumers, Markets and Potential State Responses

The deadline is approaching for federal regulatory action in response to President Trump’s October 13, 2017 Executive Order to expand access to certain health insurance products, including short-term limited-duration plans. In it, he called for proposed rules within 60 days (i.e., by December 12, 2017).

Short-term plans are generally only available to consumers who can pass medical underwriting and do not have to comply with the Affordable Care Act’s consumer protections, such as the ban on preexisting condition exclusions and rescissions, coverage of essential health benefits, and limits on consumer out-of-pocket spending.

Short-term plans received a significant amount of attention before President Trump’s Executive Order. In 2014, there were reports that some insurers were offering short-term policies that lasted for 364 days, just one-day shy of 12 months, which allowed them to escape regulation under federal law as health insurance. Because these plans are medically underwritten and offer fewer benefits to consumers, premiums are often much lower and enrollment tends to skew younger and healthier. And short-term policies have been plagued by reports of deceptive marketing practices and legal challenges for failing to pay claims.

In 2016, federal regulators issued a new rule to prohibit insurers from offering or renewing short-term policies that lasted longer than three months and require insurers to inform consumers that short-term policies do not qualify as “minimum essential coverage.” Under the Executive Order, federal regulators are widely expected to reverse this Obama-era regulation. Doing so would allow insurers to resume offering and renewing medically underwritten short-term coverage exempt from ACA rules that lasts up to 364 days.

A variety of stakeholders—including some insurers, state insurance regulators, and consumer advocates—have already raised concerns about potential changes to the regulation of short-term coverage. At this weekend’s fall National Association of Insurance Commissioners (NAIC) meeting, for instance, a representative from the Blue Cross Blue Shield Association and an appointed consumer representative made a rare joint presentation to voice concerns that short-term plans would further destabilize the individual market, increase costs to those most needing comprehensive coverage, and raise risks for consumers who enroll in them. These discussions are likely to continue at the NAIC: the Regulatory Framework (B) Task Force has been tasked with monitoring, analyzing, and reporting on developments related to short-term coverage beginning in 2018.

Discussions at forums such as the NAIC are key because state insurance regulators play a primary role in regulating short-term coverage. In a new issue brief distributed at the NAIC’s fall meeting and supported by the Robert Wood Johnson Foundation, Georgetown University’s Center on Health Insurance Reforms (CHIR) identified a range of policy options that state policymakers can consider regarding the regulation of short-term coverage. These policy options include:

  • Banning or limiting the sale of short-term coverage. State policymakers could require short-term coverage to comply with rules for the individual market or the ACA market reforms; limit the duration of short-term coverage; and require nonrenewable short-term coverage to be discontinued at the end of the calendar year.
  • Allowing the sale of short-term coverage but reducing the risk of market segmentation. State policymakers could assess insurers that offer short-term coverage; require short-term policies to meet a minimum medical loss ratio; and require consumers to have a marketplace eligibility determination before an insurer can enroll them in short-term coverage.
  • Increasing consumer disclosures and regulatory oversight. State policymakers could require insurers to disclose the limitations of short-term coverage on applications, websites, and in marketing materials; educate consumers about short-term coverage through state insurance websites and consumer alerts; and subject short-term coverage to additional regulatory review by, for instance, tracking enrollment and investigating consumer complaints and broker commissions.

To learn more about state policy options in the wake of President Trump’s Executive Order, read the full brief here.


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