In February, the Trump administration published a proposed rule to expand the availability of short-term, limited duration insurance (STLDI) by relaxing federal restrictions put in place by the Obama administration. Short-term plans are not considered health insurance under federal law. As a result, they do not have to comply with the Affordable Care Act’s (ACA) consumer protections. For example, insurers selling STLDI can deny enrollment to people with pre-existing conditions and exclude from coverage essential health benefits like prescription drugs, maternity, and mental health treatment services. Also, unlike ACA-compliant policies, short-term plans are not subject to the medical loss ratio or risk adjustment, so they are not obligated to spend a certain amount of premium dollars on medical care, and they have no incentive to cover individuals with high-cost conditions.
The Obama administration limited the duration of these policies to three months, with the goal of limiting their ability to siphon healthy people away from the ACA’s health insurance marketplaces. They also sought a federal definition that more appropriately reflects STLDI’s purpose, which has traditionally been to fill temporary gaps in coverage. Under the Trump administration’s proposed rule, short-term plans would be allowed to extend for up to 364 days – mimicking the length of ACA-compliant policies and enabling insurers to market them as alternatives to traditional health insurance. For more detail on the proposed rule, please read our issue brief here.
The Departments of Labor, Health & Human Services and Treasury received over 9,000 comments on the proposed rule. According to a recent Los Angeles Times analysis, among health care stakeholders who commented, 98 percent criticized the proposal, with many noting the potential harm to patients and people with pre-existing conditions. In addition to this analysis, we analyzed comments from health care stakeholders such as consumer and patient groups, major medical insurers, and State Insurance Departments and Marketplaces.
In this fourth blog in our series, we reviewed comments from companies that sell short-term plans as well as insurance brokers and broker associations. Our final blog will summarize the major themes from all four stakeholder groups.
Included in our sample of short-term plan insurers and brokers are:
Independent Agents and Brokers of America
National Association of Health Underwriters
Insurers and brokers who commented were unanimous in their views that expanding short-term plans would increase choice and affordability for certain consumers in the individual market, and they generally held that states should keep primary authority over the regulation of such plans. There was, however, variable concern regarding the stability of the individual market, effects on consumers, and preferred durations and limitations on short-term plans. We summarize their comments below.
Expanding short-term health insurance provides consumers with more options
The commentators in our sample highlighted that consumers in many states lack a choice of affordable products in the individual market, particularly if they are buying coverage outside of the annual open enrollment period. For example, eHealth cited its own survey, which found that individuals earning less than $69,000 per year and families earning less than about $129,000 generally consider traditional health insurance to be unaffordable. For some of these families, premiums are above 10 percent of their household income. Additionally, Healthcare Solutions Team, a health insurance agency in Maryland, stated that short-term plans may be one of the only affordable options for those who lose job coverage and cannot afford COBRA or an ACA-compliant plan.
Most brokers and insurers believe states should have authority over short-term insurance regulation
Almost all companies and organizations in our sample expressed support for states as the primary regulator of short-term insurance plans. Only IHC Group, a national short-term plan seller, suggested otherwise. In its comments, the company recommended that the Departments encourage the development of a standardized regulatory framework for short-term plans that would cross state boundaries, presumably in order to avoid the effort of complying with multiple different state requirements.
Insurers and brokers had differing views on consumer disclosures
Brokers and short-term plan sellers expressed a range of views about the proposed rule’s requirement that plans disclose to consumers that that the coverage doesn’t comply with the ACA, and cautioning them to closely review details about their plan. For example, the National Association of Health Underwriters recommended requiring short-term plan insurers to better detail what the insurance coverage does and does not cover, and possibly to offer consumers a side-by-side comparison to ACA-compliant coverage. UnitedHealth Group recommended the Departments clarify the degree to which insurers can choose to alter consumer disclosures, suggesting the companies may want to provide more information than what is prescribed by federal rules. The IHC Group noted that the proposed disclosure language would need to be adjusted each year, potentially requiring annual review and approval by some state insurance departments. The company asked the Departments to devise a disclosure statement that would not need to change, to avoid additional regulatory burden on short-term plan sellers.
Brokers and insurers prefer varying durations for short-term plans
The Independent Agents and Brokers of America supported the proposal to extend short-term plans to 364 days, disputing critics that argue the increased length will de-stabilize individual insurance markets. The association asserts there is not “any statistical evidence that the 2016 rule helped prop-up state insurance markets, and specifically the individual health insurance market.”
The IHC Group and eHealth suggested that short-term plans be allowed to cover even longer durations. eHealth recommended that ultimate limit could be up to five years. The IHC Group, having recently introduced a product that covers an enrollee’s pre-existing conditions up to $25,000, recommended giving consumers the ability to renew after twelve months, while giving companies the ability to assess the enrollee’s health status again at the point of renewal. UnitedHealth Group urged the Departments to keep short-term plans’ exemption from HIPAA’s guaranteed renewability protection, arguing that requiring companies to allow a consumer to renew a policy on request would raise prices and reduce availability of short-term plans.
On the other hand, the National Association of Health Underwriters recommended shorter duration requirements, such as a 6-month plan with one full renewal, or a renewal until January, whichever is shorter. Beyond this, the association suggested the Departments consider limiting eligibility in short-term plans to those with a hardship exemption from the individual mandate or otherwise ineligible to purchase insurance on the individual market with a premium tax credit. They urge the Departments to “strike a balance of providing an affordable and sufficient coverage option for those who are truly experiencing a gap and avoiding a true bifurcation of the individual market between healthy and sicker individuals that is harmful to all.”
A Note on our Methodology
This blog is intended to provide a summary of some of the comments submitted by a specific stakeholder group: short-term insurers and brokers. Comments were selected to provide a range of perspectives. This is not intended to be a comprehensive report of all comments from short-term plan companies and brokers on every proposal in the short-term, limited duration insurance proposed rule. Other posts in this blog series have summarized comments from major medical insurers, consumer and patient advocates, and state-based marketplaces and state insurance regulators. Our fifth and final blog will summarize the major themes from all four stakeholder groups. For more stakeholder comments, visit http://regulations.gov.