Taking Action to Prevent the Harmful Impact of Short-Term Plans
This article explores the recently established rule on short-term limited duration plans - as proposed by HHS - which would not comply with consumer protections afforded under ACA.
The U.S. Department of Health and Human Services (HHS) has proposed a new rule, open for comment until April 23, 2018, that is dangerous to consumers and to health care marketplaces. This rule would expand the sale of “short-term limited duration plans” that do not have to comply with the consumer protections afforded under the Affordable Care Act (ACA) and often leave consumers uncovered for major medical expenses.
The short-term plan rule will harm consumers and health care markets
The proposed rule would alter the definition of short-term plans as a backdoor way of creating a new class of plans that do not have to comply with the ACA, extending the duration of short-term plans from policies that last for 3 months to policies that can last just short of one year. Under this rule, insurers may also be allowed to renew a short-term plan for an enrollee after that period is up.
Companies selling these plans can make large profits at consumers’ expense, and the plans do not have to cover pre-existing conditions, provide essential health benefits, include adequate provider networks, or comply with a host of other key protections, as we describe in Seven Reasons the Trump Administration's Short-Term Health Plans Are Harmful to Families. Moreover, if many young and healthy people are drawn into these plans, the plans will undermine the market for real coverage, driving up prices in the ACA-compliant marketplace.
Now is the time to take action to prevent short-term plans from harming consumers and insurance markets throughout the country. Here we outline how advocates, consumers, and states can take action to address this harmful rule.
Stakeholders can urge HHS to stop the spread of harmful short-term plans
It’s important that HHS hears from stakeholders all over the country about how short-term plans will leave those who enroll in them without adequate protection from the costs of care, and how those who seek to stay in the market for comprehensive coverage will experience spikes in premiums and jeopardized access to coverage if short-term plans are allowed to expand.
The short-term plan rule will also burden states and insurance companies that are interested in making comprehensive coverage affordable. Particularly if the rule allows the proliferation of short-term plans that last for up to 12 months to take effect after insurers have already planned their premium pricing for 2019, these plans will cause chaos for comprehensive insurance providers and states alike in maintaining a stable insurance market. These expanded short-term plans should not be put on the market at all, but at the very least HHS should delay implementation of the final rule to give states and insurers more time to plan for it to take effect.
Advocates, consumers, state officials, health care providers, and other stakeholders can all make a difference by commenting to HHS about these problems. Stakeholders can also make a difference by urging state policymakers and officials to comment on the rule as well. Comments should urge HHS to stop or at the very least delay implementation of the rule on short-term plans. Comments should be submitted here by 5 PM on Monday, April 23rd.
States can take direct action to protect against short-term plans
States can take direct action to protect consumers and insurance markets from the harm of short-term limited duration plans. States have broad authority to regulate short-term plans and can adopt new laws or issue new regulations or guidance that exceeds the standards in the proposed rule. Given other upcoming changes in 2019 that will also pose risks for the market, including the repeal of the individual mandate penalty, taking swift action is particularly important.
These strategies can provide protections for consumers and help limit market instability caused by the expansion of short-term plans.
States can prohibit short-term plans altogether. Massachusetts, New Jersey, and New York currently prohibit short-term plans, and California is pursuing a prohibition via SB910 (Hernandez).
States can require that short-term plans comply with all protections that health plans sold on the comprehensive individual market meet. For example, a few states prohibit short-term plans from refusing to sell to a consumer based on their health status— those plans cannot “underwrite,” or take people’s health status into consideration when people seek to buy them. States could protect consumers from the harm of short-term plans by applying the same requirements to them as apply to comprehensive insurance. These include requirements for external review, essential health benefits and state benefit mandates, network adequacy, medical loss ratios, and pre-existing condition protections, including a requirement that plans do not charge people rates based on their health status. States can also ensure companies that offer short-term plans have to pay any existing state-based assessments, such as insurer taxes. States could also consider assessing short-term plan insurers and using those funds for a reinsurance program for plans that meet ACA standards.
- States can restrict the duration of short-term plans. For example, states can pass laws prohibiting short-term plans from lasting for longer than 3 months. This will ensure that these plans are used as they were intended- to fill short gaps in coverage- and not as a long-term solution to substitute for real coverage. Some states already limit the period for which a short-term plan can be sold to less than the nearly 12 months allowed in the proposed federal rule. For a good index of such state laws, see State Regulation of Coverage Options Outside of the Affordable Care Act: Limiting Risk to the Individual Market from the Georgetown Center on Health Insurance Reform.
- States can prohibit short-term plans from renewing consumers’ policies beyond their allowed duration: To ensure that short-term plans are not treated as a replacement for comprehensive insurance, states can prohibit plans from renewing their contract with a consumer once the duration of the short-term plan is over. For example, a state could prohibit insurers from selling a short-term policy to anyone who has enrolled in one during the last 12 months.
- States can require strong disclosure and marketing rules to ensure short-term plans are transparent about their shortfalls. States can require short-term plans to include prominent disclosures in marketing materials (including websites), application forms, and other forms to warn people about what the plans do not cover and how they may expose consumers to high out-of-pocket costs. For example, Colorado requires short-term plans to provide such a disclosure to warn people about the lack of coverage for pre-existing conditions in short-term plans. Additionally, states can require short-term plans to supply simple, clear, and comparable information about what benefits they do and do not cover, and corresponding cost-sharing requirements. Comprehensive plans must comply with requirements to produce a summary of benefits and coverage, and states could apply such requirements to short-term plans as well.
There are additional protections that states may want to consider to protect people from the harms of short-term plans. For additional discussion of how states can take action, see State Options to Protect Consumers and Stabilize the Market: Responding to President Trump’s Executive Order on Short-Term Health Plans by the Georgetown Center on Health Insurance reform.
State legislators and insurance departments can lead the efforts to enact these important protections. And, they along with any health care ombudsman programs or other organizations that assist health insurance consumers in the state may know of complaints and problems regarding short-term plans that can inform what protections the state should enact. State attorneys general, Better Business Bureaus, or other consumer protection agencies may also be aware of problems and can be helpful allies in efforts to prevent short-term plans from harming consumers and insurance markets alike.
Additionally, the National Association of Insurance Commissioners (NAIC) is currently updating its model law for states on Accident and Sickness Insurance Minimum Standards (Model #170) and its companion regulation, the Model Regulation to Implement the Accident and Sickness Insurance Minimum Standards Model Act (Model #171). NAIC consumer representatives including Families USA are advocating to make these models as robust possible in their protection of consumers and the market from the damage of short-term plans. (See the March 2018 report by the NAIC consumer representatives and former Montana regulator Christina Goe, Non-ACA-Compliant Plans and the Risk of Market Segmentation.)
This article was brought to you by Families USA by Claire McAndrew on April 2018.
