Health Reform WK-EDGE Short-term, limited-duration plans proposed for up to 12 months
Tuesday, February 27, 2018

Short-term, limited-duration plans proposed for up to 12 months

By Harold Bishop, J.D.

Consumers would be allowed to purchase short-term, limited-duration health insurance plans providing coverage for any period of less than 12 months, rather than the current maximum period of less than three months, under a joint Proposed rule issued by the Departments of HHS, Labor, and Treasury (Departments). The Proposed rule would implement President Trump’s October 12, 2017 Executive Order 13813, "Promoting Healthcare Choice and Competition Across the United States," which directed federal agencies to propose regulations or revise guidance to expand the availability of short-term, limited-duration insurance and allow it to cover longer periods (Proposed rule, 83 FR 7437, February 21, 2018).

Temporary coverage not an "individual plan." Short-term, limited-duration insurance is exempt from the definition of individual health insurance coverage under section 1501 of the Patient Protection and Affordable Care Act (ACA) (P.L. 111-148) and is therefore not subject to the ACA provisions that apply to individual health insurance plans. This type of coverage is designed to provide temporary coverage for individuals transitioning between healthcare policies, such as an individual in between jobs, or a student taking a semester off from school.

Under the Obama Administration, a Final rule (81 FR 75316) published in October 2016, which changed the definition of short-term, limited-duration insurance that had been in place for nearly 20 years. The 2016 Final rule revised the definition to specify that short-term, limited-duration insurance could not provide coverage for three months or longer, including any renewal periods.

Reverting to prior definition. In response to the October 31, 2016 Final rule, and to a June 12, 2017 request for public comment on existing regulations surrounding the affordability of coverage, consumer choice, marketplace stability, and state regulatory authority over health insurance markets (HHS seeks public comment on market improvement strategies, June 14, 2017), health insurers and state regulators expressed concerns that the three month limit on short-term, limited-duration insurance could cause harm to some consumers, limit consumer options, and would have little positive impact on the risk pools in the long run. The Proposed rule would address these concerns by reverting to the previous definition of short-term, limited-duration insurance which permitted coverage for nearly a full 12 months.

Improved access. According to HHS, short-term, limited-duration insurance is generally more affordable than ACA-compliant plans. For example, in the fourth quarter of 2016, a short-term, limited-duration policy cost approximately $124 a month compared to $393 for an unsubsidized ACA-compliant plan. In addition, HHS projects that approximately 100,000 to 200,000 additional individuals will shift from an ACA-compliant individual market plan to short-term, limited-duration insurance in 2019. Only about 10 percent of these individuals would have been subsidy-eligible if they maintained their Exchange coverage.

HHS believes that individuals and families who would benefit from this policy may include those: (1) who are between jobs or other sources of coverage; (2) who find ACA coverage too expensive or have seen their health insurance choices diminish; and (3) whose doctors are not in network under ACA plans.

Longer limited-duration plans would also reduce the risk of a gap in coverage for people with short-term coverage who become seriously ill while covered, according to HHS. Currently, a person who becomes ill would likely not qualify for another plan less than three months in duration because of the illness and would then need to wait without coverage until the next year to gain coverage in the individual market.

The Proposed rule would also include measures to help consumers who purchase short-term, limited-duration policies understand the coverage they are getting. The proposal would require one of two versions of a notice to appear in the contract and in any application materials specifying that the health insurance plan is not required to comply with ACA provisions.

Comments on the Proposed rule must be submitted by April 23, 2018.

FederalRegisterIssuances: ProposedRules AccessNews EssentialBenefitNews GeneralNews HealthInsuranceExchangeNews IndividualMandateNews InsurerNews NewsFeed

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