Due to heavy media coverage back in February, you may be aware of CMS’ latest effort to expand access to affordable coverage through the expansion of short-term health plans. CMS unveiled their Notice of Proposed Rulemaking on this effort entitled, “Short-Term, Limited-Duration Insurance” in the Federal Register on February 21. If you are a policy wonk like myself then you’ve been anticipating the release of this rule for a few months now following the President’s October 2017 executive order which essentially all but mandated it.

So, what exactly is short-term, limited-duration insurance? 

Short-term limited-duration insurance (STLDI) was designed with the intent to provide access to affordable care for individuals experiencing gaps in coverage, such as during the transition from one plan to another during a change in employment. It’s also meant to provide a cheaper alternative to ACA compliant coverage. By definition, STLDI is meant to be temporary (i.e. - less than 12 months). 

How does this proposed rule compare to Obama-Era policies?

This proposed rule reverses the Obama Administration’s October 2016 final rule that stated STLDI could only be in effect for less than three months even when including renewal periods. Under this proposed rule, the Trump Administration will permit short-term health plans to be in effect for up to 364 days, as originally allowed under the Health Insurance Portability and Accountability Act (HIPAA).

What is the potential impact on the ACA individual market?

Since short-term health plans are in effect for less than a year, they are not required to comply with ACA-related reforms like covering essential health benefits (EHBs) or prohibitions against medical underwriting. Medical underwriting basically allows payors to cherry pick the healthiest of the healthiest to reduce their expenditures by making sick people pay more to offset their liability (or just deny them coverage altogether).

The below items highlight examples of policies that short-term health plans can implement that are not compliant with the ACA:

• Not providing coverage for prescription drugs (an EHB)
• Imposing annual or lifetime limits
• Charging higher out-of-pocket amounts that exceed the maximums allowed under the ACA

Just cut to the chase…

Repeal of the individual mandate tax penalty in December 2017 will likely lead to younger, healthy individuals forgoing ACA compliant coverage. The expansion of short-term health plans will only exacerbate that, thereby leaving high-risk individuals behind. Many are worried that expanding access to short-term health plans will markedly drive up premium costs for those that remain in the individual market. Key stakeholders like Blue Cross Blue Shield Association and America’s Health Insurance Plans (AHIP) have already spoken out against the proposal.

A somewhat deeper dive version of this article is published in The URAC Report for those who want a little more detail.