HHS Hints at Letting `Skinny’ Health Plans Be Sold Even Longer

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By Sara Hansard

The Trump administration is looking at allowing sales of “skinny” health plans to be sold for a year or longer, which could further divide the individual market into healthy people and those with medical conditions.

The proposed rule, which would return sales of the non-Obamacare-compliant plans to up to a year in duration, includes a request for comments on allowing health insurers to continue sales of the plans for 12 months or longer. The plans don’t meet Affordable Care Act requirements that people with pre-existing conditions be sold coverage at the same price as healthy people, nor do they typically cover a comprehensive range of essential health benefits.

ACA supporters argue the proposal would push the individual market market back to the pre-2014 days before the ACA requirements took effect, and allowing the plans to be renewed for longer periods could make them even more attractive for healthy people at the expense of sicker ones. The Department of Health and Human Services argues the change is necessary because many people who aren’t eligible for ACA premium subsidies have been harmed by escalating premiums.

The plans are billed as covering health insurance gaps between jobs. In 2016 the Obama administration shortened the duration of short-term plans to less than three months, in part to try to prevent healthy people from leaving the ACA-compliant market. For nearly 20 years previous to that, the plans were sold for up to 12 months.

Small Fraction of Market

Short-term plans represent a small fraction of the health insurance market, the proposed rule said.

In 2016, before the Obama administration rule took effect, about 160,000 people were in the short-term market paying about $146 million in premiums, it said. That same year 13.6 million people had comprehensive major medical plans in the individual market, paying a total of $63.25 billion in premiums, it said. Sales of the plans were increasing before the 2016 Obama administration rule took effect, it said.

The HHS estimated that in 2019, after the ACA penalty for not having health insurance is reduced to zero, between 100,000 and 200,000 individuals previous enrolled in ACA exchange coverage would buy the short-term plans. When the proposal was announced Feb. 20, Centers for Medicare & Medicaid Services Administrator Seema Verma said that it would have “virtually no impact on the individual market premiums.”

UnitedHealth Group Inc. was the one of the largest sellers of the plans in 2016, according to a report from the National Association of Insurance Commissioners.

Long-Term Impact

In the short term, the proposed rule would likely accomplish its goal of providing more choices, Chris Sloan, senior manager with Washington-based health policy consulting firm Avalere Health, told Bloomberg Law Feb. 26.

However, “over the long term these could start to be pitched more like individual market policies” prior to the 2014 implementation of ACA rules, he said. “As we see how plans and states react to this, you could potentially see the growth of the short-term policy market.”

Further, “Removing the requirement to reapply or buy a different plan could boost re-enrollment in these short-term plans over the long term,” Sloan said.

But, Sloan added, “There’s an upper bound of how many people want to go into these. They’re just not that attractive as a policy.”

Unsubsidized Uninsured Rising

The HHS says short-term plans could cover some people who are currently uninsured. CMS data on exchange plans show that for the first quarters of 2016 and 2017, the number of off-exchange and unsubsidized enrollees with individual market coverage fell by nearly 2 million, an almost 25 percent decrease, the proposed rule said.

Most people who switch from individual market plans to short-term plans could be young, healthy people who make too much money to receive ACA subsidies, the HHS said in the proposal. As a result, individual market issuers could experience higher costs and suffer financial losses, which might prompt more of them to leave the market and further reduce choices, it said.

How much more risk the individual markets would bear if the rule is finalized, and if consumers could re-enroll more easily, is an open question.

Even under current rules, “The ACA individual market will remain a marketplace for individuals that receive a subsidy as well as those that have higher morbidity,” Deep Banerjee, director of health insurance ratings for S&P Global Ratings, New York, told Bloomberg Law in an email Feb. 26.

Risk Profile Won’t Improve

The possible increased availability of short-term plans and the repeal of the mandate penalty mean “the risk profile of the ACA individual pool will not improve in the future,” Banerjee said. Premiums, before taking subsidies into account, will likely not decline as well, he said.

“To the extent that short-term plans are attractive to lower-cost individuals, they could contribute to a deterioration of the ACA individual market and lead to higher ACA premiums,” Cori Uccello, senior health fellow with the American Academy of Actuaries, Washington, told Bloomberg Law in an email Feb. 26.

A report released Feb. 26 by the Urban Institute, which has been supportive of the ACA, found that expanding short-term policies as proposed by the HHS would increase the number of people without minimum essential coverage by 2.5 million in 2019. But it also found if the rules on short-term plans are loosened, 1.7 million of the people buying short-term policies would have been uninsured.

In addition to health status, subsidies are a primary driver for ACA enrollment.

“If you’re eligible for a generous subsidy the ACA premium is going to be more attractive because the government’s paying the majority of the premium,” Greg Fann, a senior consulting actuary with Axene Health Partners LLC based in Murrieta, Calif., told Bloomberg Law Feb. 26. “Not having renewability is a small barrier, but I don’t think that’s the key focus.” Fann is a fellow with the Society of Actuaries.

If the proposed rule is finalized, and if people can re-enroll without reapplying or going through other steps, the ACA-compliant market will be smaller, Fann said. The short-term market is “going to be attractive to high-income people who are in good health.”

ACA Plans Still Available

But Joel White, president of the Washington-based Council for Affordable Health Coverage, told Bloomberg Law Feb. 26 that even if more healthy people leave the ACA market, ACA plans will continue to be available for people who need them.

The proposed rule is likely to “have an initial small impact,” White said. To a great extent, the ACA market already functions much like a high-risk pool market, he said. “That’s a function of Obamacare. It’s not a function of short-term medical,” he said.

To stabilize the ACA markets, Congress needs to enact legislation that would enhance reinsurance funding to health insurers, White said.

Republican and Democratic governors called for stabilizing the health insurance market and prioritizing value-based care in a Feb. 23 blueprint. But a bipartisan plan from Sens. Lamar Alexander (R-Tenn.) and Patty Murray (D-Wash.) hasn’t gone anywhere.

To contact the reporter on this story: Sara Hansard in Washington at shansard@bloomberglaw.com

To contact the editor responsible for this story: Kendra Casey Plank at kcasey@bloomberglaw.com

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