A proposed rule issued by the Trump administration on Tuesday would expand the coverage period for short-term insurance plans, a policy shift that some worry will weaken the individual market.
The announcement builds on broader efforts by the Trump administration to reshape the Affordable Care Act. Tuesday’s proposed rule (PDF), issued by three federal agencies, would roll back Obama-era limitations on short-term plans, allowing consumers to purchase less comprehensive coverage for a period of up to 12 months. The Obama administration previously limited short-term plans to a maximum of three months.
That policy shift is one of several outlined in an executive order signed by President Donald Trump in October that also asks federal agencies to consider expanding association health plans and change health reimbursement arrangements (HRAs). Last month, the Department of Labor issued a proposed rule that would shift regulations surrounding association health plans.
In a press call, Department of Health and Human Services Secretary Alex Azar said the regulation change would expand coverage options available to consumers, adding that “affordable options have disappeared for an increasing number of Americans.”
“We are proposing to give these consumers what they need by working across federal agencies and delivering on one of the Trump administration’s signature promises: to put patients first,” Centers for Medicare and Medicaid Services Administrator Seema Verma added, noting that average individual premiums among the 39 states using the federal exchange have more than doubled since 2013.
Short-term plans would not be subject to several ACA mandates including the inclusion of essential health benefits, guaranteed issue and community rating. Verma said insurers will be required to “prominently display” language in the contract and application that the policy is not required to comply with federal health insurance requirements. Additionally, consumers that purchase short-term plans may owe a penalty in 2018 before the individual mandate drops off next year.
Insurers also aren’t required to guarantee the renewal of short-term plans, although CMS is requesting comments about what how to best incorporate renewability options.
“Americans need more choices in health insurance so they can find coverage that meets their needs,” Azar said in a statement. “The status quo is failing too many Americans who face skyrocketing costs and fewer and fewer choices.
The expansion of short-term health insurance plans is part of a strategy to create a parallel insurance market that does not comply with the ACA's rules.— Larry Levitt (@larry_levitt) February 20, 2018
With the expansion in short-term insurance plans, low-income people will be protected from higher premiums by subsidies. Middle-class people with pre-existing conditions will feel the full brunt of higher premiums.— Larry Levitt (@larry_levitt) February 20, 2018
Critics of the policy—including the Blue Cross Blue Shield Association and America’s Health Insurance Plans (AHIP)—have argued expanding the duration of short-term plans would destabilize the individual markets by siphoning off healthy individuals attracted to lower cost plans with skimpier coverage, and subsequently driving up premiums for consumers with pre-existing conditions.
"While we are reviewing the proposed rule to understand its impact on the people we serve, we remain concerned that expanded use of short-term policies could further fragment the individual market, which would lead to higher premiums for many consumers, particularly those with pre-existing conditions," AHIP spokesperson Kristine Grow said in an emailed statement.
But Verma dismissed those concerns. CMS projects that between 100,000 and 200,000 people will shift from the individual marketplace to short-term plans. She said the new policy intends to provide an option for the 28 million individuals who remained uninsured, including 6.7 million who elected to pay the individual mandate penalty last year.
“This shift will have virtually no impact on individual market premiums,” she told reporters.
Some insurers stand to benefit from the change. UnitedHealth has expressed optimism about the expanded use of association plans and short-term plans given its experience with both types of policies.