Health Reform WK-EDGE ACA reforms did not alter definition of STLDI individual health insurance coverage
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Monday, July 29, 2019

ACA reforms did not alter definition of STLDI individual health insurance coverage

By Jeffrey H. Brochin, J.D.

Federal agencies acted within their authority in passing the 2018 Final Rule restoring the Short-Term Limited Duration Insurance (STLDI) definition as provided in the 1996 HIPAA law.

A federal district court in Washington, D.C. has granted the motion for summary judgment filed by the U.S. Departments of Labor, Treasury, and Health and Human Services (HHS) in a lawsuit brought by Association for Community Affiliated Plans (ACAP), an association of nonprofit and community-based insurers that provide qualified health coverage to individuals through marketplaces established pursuant to the Patient Protection and Affordable Care Act (ACA) (P.L. 111-148). Because the ACA did not address nor redefine Short-Term Limited Duration Insurance (STLDI) among its provisions, the agencies were free to promulgate the August 3, 2018, final rule (83 Fed. Reg. 38,212) based on the existing STLDI definition cited in the Health Insurance Portability and Accountability Act of 1996 (HIPAA) (Association for Community Affiliated Plans v. U.S. Dept. of TreasuryJuly 19, 2019, Leon, R.).

Origins of STLDI. In 1996, Congress passed HIPAA which was designed in part to improve the availability and continuity of health insurance coverage in individual and group markets, and to create federal standards for individual health insurance coverage. That coverage was defined to mean "health insurance coverage offered to individuals in the individual market, but not including STLDI." HIPAA thereby exempted STLDI from individual market regulations, and, it guaranteed coverage availability and preexisting condition protections to eligible individuals with 18 or more months of creditable coverage.

HIPAA also capped the period during which a health insurer could exclude benefits for preexisting conditions to 12 months from enrollment, allowing people who changed plans protection in full or part from benefit denials. Subsequent administrations adopted rules effectively defining STLDIs as per HIPAA.

ACA silent as to STLDI. In 2010, fourteen years after Congress passed HIPAA, the ACA was passed which legislated extensive reforms to the health insurance market. However, not found among ACA’s reforms was any change to HIPAA’s existing definition of "individual health insurance coverage"—which definition, as noted above, specifically excluded STLDIs-- and therefore STLDIs under the ACA remained exempt from market regulations.

The court noted that it was not in dispute that after the ACA took effect in 2014, health care costs began to rise, and individual premiums increased 105 percent between 2013 and 2017. By 2016, the Obama Administration became concerned that individuals were purchasing STLDI coverage as their primary health insurance coverage. They therefore adopted a Final Rule redefining STLDI so that coverage would be less than three months, and, the maximum term and duration effectively prohibited renewals.

Final Rule being contested. In order to expand the availability of and access to STLDI and promote competition in the healthcare markets, President Trump signed Executive Order No. 13813 on October 12, 2017, and the administration’s agencies responded with their 2018 Final Rule in order to restore the definition of STDLI to its original twelve-month maximum term that was in place when Congress adopted ACA. ACAP, claiming standing as an organization whose members would be adversely affected by such competition filed the instant action challenging the 2018 Final Rule as violating the Administrative Procedures Act (APA.)

No exceeding authority. The complaint essentially alleged that the federal agencies exceeded the limits of their authority imposed by the ACA in promulgating the 2018 final rule. They claimed that the ACA’s structure and purpose forbade the agencies’ interpretation of STLDI and that the 2018 final rule improperly created an alternative individual health insurance market extending beyond the ACA’s reforms. However, the court found that there was no serious question that Congress delegated to the agencies the authority to define SLDI when it enacted HIPAA in 1996, and, that during the years between HIPAA’s interim rule and the enactment of the ACA in 2010, the agencies exercised their authority to define STLDI without challenge or resistance: notably, ACAP did not contend that the agencies exceeded their congressionally delegated power to define STLDI when they enacted defining rules from 1997 through 2016, but rather only objected to the 2018 Final Rule which was not to their liking.

The court found nothing "extraordinary" about the regulatory power exercised in promulgating the 2018 final rule, and therefore granted the motion for summary judgment filed by the regulatory agencies.

The case is No. 1:18-cv-02133-RJL.

Attorneys: Andrew John Pincus (Mayer Brown LLP) for Association for Community Affiliated Plans and National Alliance on Mental Illness. Bradley P. Humphreys, U.S. Department of Justice, for the U.S. Department of Treasury, U.S. Department of Labor and U.S. Department of Health and Human Services.

Companies: Association for Community Affiliated Plans; National Alliance on Mental Illness

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