By Todd Fanter, J.D.
The Congressional Budget Office created this letter in response to two Senators’ request that the agency examine recent research about short-term, limited duration insurance, examine its characterization of short-term, limited-duration insurance, and update its estimates of enrollment in STLDI accordingly.
After performing its most recent review, which accounted for recent research on short-term, limited-duration insurance ("STLDI"), the Congressional Budget Office ("CBO") concluded that the evidence available to date did not warrant changing its expectation that there will be two projected categories of STLDI plans: those that provide what CBO considers insurance coverage and those that do not. The CBO anticipated that the majority of people who enroll in STLDI as a result of the most recent regulations will enroll in plans that do provide insurance coverage (CBO Report September 25, 2020).
In January 2019, the CBO published a report describing the estimated effects on enrollment of the Administration’s August 2018 rule governing STLDI that reverted to the previous limit on the duration of STLDI plans (364 days). On the basis of interviews with insurers, state regulators, and other stakeholders, the CBO identified two types of STLDI that were likely to emerge: traditional short-term plans ("TSPs") and insured short-term plans ("ISPs"). In the report, the CBO projected that each year between 2019 and 2028, roughly 1.5 million people would be enrolled in STLDI as result of the 2018 rule. About half of those people would have otherwise been enrolled in nongroup coverage, and about half would have otherwise been uninsured.
Recent research found that many of the STLDI plans being sold provided very limited benefits to enrollees, and that research raised questions about whether such plans constituted insurance. But the research differed from CBO’s analysis in three important ways and therefore did not provide evidence to support changing the agency’s projections.
Firstly, most of the available evidence about STLDI suggesting that it did not constitute health insurance coverage comes from the time before the 2018 rule took effect. Such STLDI typically provided limited coverage for three months or less.
Next, because states had adopted different approaches to regulating STLDI, analyses of a sample of states may provide an unrepresentative picture of the market. For example, a recent study of STLDI in five states showed that those plans offered limited benefits, but those five states were among the minority of states that have not enacted regulations exceeding the federal requirements. Because coverage sold in those states was less regulated than coverage sold in most states, the STLDI plans considered in the study were likely to include fewer benefits and provide less extensive coverage than STLDI plans in a broader sample of states.
The CBO’s estimates, by contrast, accounted for the different kinds of state regulations affecting STLDI – increasing the CBO’s projections of enrollment in ISPs and reducing its projections of enrollment in TSPs. Specifically, some states entirely prohibited the sale of STLDI or limited the length of enrollment in STLDI to shorter periods than the federal rule allows, reducing enrollment in TSPs. Other states required STLDI to comply with the Patient Protection and Affordable Care Act ("ACA")’s requirements for nongroup insurance, such as covering preexisting conditions and spending a defined percentage of premium revenues on enrollees’ health care; those requirements increase enrollment in ISPs.
Lastly, other research frequently characterized insurance coverage on the basis of its compliance with the ACA’s requirements for nongroup health insurance. The CBO, by contrast, defined health insurance coverage as a policy that covered high-cost medical events and included coverage for services provided by physicians and hospitals. That definition included plans that must comply with the ACA’s regulations, but it also included some coverage that was exempt from such regulations.
Thus, the criteria used in recent research to characterize the comprehensiveness of coverage did not correspond to the criteria that the CBO used to determine whether coverage constituted insurance or not. For example, the analysis of STLDI in five states explored whether STLDI plans were sold through an association; paid for health care services at substantially lower rates than other health plans did; lacked a provider network; failed to cover preexisting conditions, prescription drugs, maternity health care, or mental health benefits; and denied enrollment on the basis of health status.
The letter concluded with the statement that the CBO will continue to monitor developments in the market for STLDI, and as new evidence becomes available, the agency will update its projections of enrollment in STLDI accordingly.
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