Short-Term Health Plans Cut to Under Three Months in New Rule

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By Sara Hansard

Oct. 28 — Short-term health plans bought by as many as a million people that don’t comply with the Affordable Care Act must be limited to less than three months under a final rule issued Oct. 28 by three agencies.

The short-term plans currently are limited to less than one year. They must end by Dec. 31, 2017, under the final rule (RIN:0938-AS93) from the Department of Health and Human Services, Department of Labor and the Internal Revenue Service. The plans are popular in states that haven’t expanded Medicaid under the ACA because they cover fewer benefits and cost less.

America’s Health Insurance Plans (AHIP) and the BlueCross BlueShield Association have generally supported the proposal, arguing that the plans are attracting healthier people who could help reduce costs if they were part of the risk pool in the ACA-compliant individual market. But the National Association of Insurance Commissioners argued that banning the plans would result in many people ending up uninsured if they were caught between jobs without insurance.

“We strongly support efforts to improve the individual market risk pools and believe the new standards on short-term policies announced today are a positive step that will ultimately benefit consumers,” AHIP said in an e-mail to Bloomberg BNA Oct. 28.

Proposed Rule Generally Adopted

The final rule, Excepted Benefits; Lifetime and Annual Limits; and Short-Term, Limited-Duration Insurance, generally adopts what was proposed in June, except that it pushes back the enforcement date to only affect short-term plans issued on or after April 1, 2017. The final rule is to be published in the Federal Register Oct. 31.

Under the Affordable Care Act, most people who don’t have minimum essential coverage for longer than three-month periods are liable to pay a penalty, and the final rule aligns the length of the noncompliant plans with that requirement, Dania Palanker, assistant research professor at Georgetown University’s Center on Health Insurance Reform, told Bloomberg BNA Oct. 28.

The final rule “closes remaining gaps that existed in the market,” Palanker said. “It’s not a comprehensive insurance policy, which is why it is less expensive than the alternatives that meet the Affordable Care Act requirements.”

Short-Term Plans as Primary Coverage

The ACA exempts short-term health plans from requirements for plans sold in the marketplaces, such as barring pre-existing condition exclusions and banning lifetime and annual dollar limits on essential health benefits.

However, “In some instances, individuals are purchasing this coverage as their primary form of health coverage and, contrary to the intent of the 12-month coverage limitation in the current definition of short-term, limited-duration insurance, some issuers are providing renewals of the coverage that extend the duration beyond 12 months,” the agencies said in the final rule.

Because the short-term policies can be medically underwritten based on health status, “healthier individuals may be targeted for this type of coverage, thus adversely impacting the risk pool for Affordable Care Act-compliant coverage,” the final rule said.

AgileHealthInsurance, a health insurance brokerage company owned by Health Insurance Innovations that sells the short-term plans, is “disappointed the federal government didn’t listen to the overwhelming comments that were negative” about the proposed rule, Executive Director Sam Gibbs told Bloomberg BNA Oct. 28. He estimated that 800,000 to 1 million people are enrolled in the short-term plans.

But Gibbs said he doesn’t believe AgileHealthInsurance, based in Mountain View, Calif., will be hurt by the final rule. Most short-term plans currently sold are about 90 days in duration, and customers can reapply for other plans afterward, he said.

“It’s going to be inconvenient but it won’t substantially affect the market,” Gibbs said.

An HHS report released Oct. 24 showed that monthly premiums for benchmark silver-level plans on which ACA subsidies are based are going up by an average of 25 percent in the 38 states using the federal HealthCare.gov website, which is the sharpest increase since the marketplaces opened in 2014.

Consumers Will Look for Alternatives

“Consumers will continue to look for alternatives,” Gibbs said. Although the short-term plans don’t meet all ACA requirements, many of them offer the benefit of unrestricted access to health-care providers, while many ACA plans have more restricted provider networks, he said.

The short-term plans have proven to be popular in the 19 states that haven’t expanded Medicaid under the ACA because low-income people in those states who don’t qualify for Medicaid are exempt from paying the individual penalty for not having qualified ACA coverage, Gibbs said. In addition, many college students who no longer qualify for student coverage buy them, as well as early retirees who aren’t yet eligible for Medicare, he said.

The final rule will “negatively impact the market,” Joel White, president of the Council for Affordable Health Coverage (CAHC), based in Washington, told Bloomberg BNA Oct. 28. The CAHC is an alliance of employers, health insurers, patient groups, providers and consumer groups campaigning for lower health-care costs.

“You’re basically taking choice away from people to get them into the more expensive Obamacare market,” White said.

The CAHC is pleased that the final rule doesn’t make changes to fixed indemnity plans, which provide fixed benefits for about 49 million people who can’t work for short periods due to medical disabilities, White said. However, “The administration said at some point in the future we’re going to come back and try to regulate these things,” he said.

Fixed indemnity plans, sold by companies such as Aflac Inc., aren’t health insurance plans, but are “cash income replacement plans if you get sick,” White said.

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

To contact the editor responsible for this story: Brian Broderick at bbroderick@bna.com

For More Information

The final rule is at http://src.bna.com/jH7.

AHIP’s comment letter is at http://src.bna.com/hHd.

The Blue Cross Blue Shield Association’s comment letter is at http://src.bna.com/hHA.

The National Association of Insurance Commissioners’ comment letter is at http://src.bna.com/hHC.

The HHS report, Health Plan Choice and Premiums in the 2017 Health Insurance Marketplace, is at http://src.bna.com/jIT.

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