The Obama administration, citing consumer protections, had limited such plans, which are cheaper with skimpier benefits than ACA-compliant plans, to a duration of less than three months, and they weren’t renewable.
The Trump administration has touted the move to expand access to short-term insurance coverage as a way to make healthcare coverage more affordable for people who have been priced out of the individual market.
“This action will help increase choices for Americans faced with escalating premiums and dwindling options in the individual insurance market,” Jim Parker, HHS senior adviser to the secretary for health reform, said late Tuesday during a press conference.
But after the administration issued the proposed rule to expand short-term limited-duration insurance back in February, many insurers, provider groups, and consumer advocates said plans could harm consumers who don’t understand the limitations of the coverage they are buying. Critics also argued that premiums in the individual market would rise as young, healthy people leave exchanges that need those young people to balance out the risk pool.
The final rule largely ignores their concerns.
Health insurers could start selling short-term plans that last up to a year in as soon as a couple of months. The final rule goes into effect 60 days after it is posted, though state regulators would still need to approve new plans.
While the final rule would allow insurers to sell plans that last up to one year and allow those plans to be renewed for up to a period of three years, it does not require renewability. That will be left up to the insurer to decide whether it will allow consumers to renew their coverage without having to re-apply for a plan.
Officials said the renewability provision was modeled after COBRA plans, which allow people who have left a job to purchase the same health insurance they had when working for that employer for up to 36 months in some cases.
The CMS said it expects about 600,000 additional people to enroll in short-term limited duration plans in 2019, with that figure reaching 1.6 million people by 2021 or 2022. It expects about 200,000 people to swap their individual market coverage for short-term insurance.
It does not project a big impact on individual market premiums. The CMS said premiums for 2019 ACA exchange plans are projected to rise 1%, while net premiums would decrease 6%.
Insurers must prominently display in the contract and application that the policy is exempt from requiring some ACA protections.
Short-term plans sidestep many ACA protections, making them cheaper but also skimpier than other ACA-compliant plans on the individual market. The plans can deny consumers coverage for having preexisting conditions or charge them more based on their health status. The plans also do not have to cover the ACA’s 10 essential health benefit categories, such as maternity care or prescription drugs, for example.
“We make no representation that it’s equivalent coverage,” Parker said. “These policies will not necessarily cover the same benefits or extend coverage to the same degree, but what we do know is that there are individuals today who have been priced out of coverage because of the way the ACA has been implemented and the effects that it’s had on the market.”
The short-term insurance market is small compared with enrollment in the exchanges. In 2017, about 122,500 people were enrolled in short-term health insurance coverage, down from 160,000 enrolled in 2016, according to the National Association of Insurance Commissioners.
Previously, enrollment in the plans was held in check by the individual mandate penalty because short-term coverage does not satisfy the minimum essential insurance requirement. But the administration’s move to zero out that penalty starting in 2019 has opened the door for the expansion of short-term plans.
While some health insurers have said they have no plans to sell short-term plans, others are gearing up to capitalize on the CMS rule.
Some states, such as California and Minnesota, have limited the length of time a consumer can enroll in a short-term plan and banned renewals. The CMS said states will continue to be able to regulate short-term plans how they wish.