February 28, 2018

Proposed Regulation on Short-Term, Limited-Duration Health Plans

Short-term, limited-duration plans are intended for people who are between jobs or otherwise are uninsured on a temporary basis. These plans do not need to provide "essential health benefits" or limit out-of-pocket expenses, and they can be medically underwritten. That is, an insurer can deny or charge more for coverage based on pre-existing conditions. As a result, premiums for these plans are relatively low, and thus attract consumers who do not anticipate having significant medical expenses. Under current federal regulations finalized in 2016, short-term limited-duration plans can be in effect only up to three months and cannot be renewed. (State law can impose stricter rules, such as requiring short-term plans to comply with ACA-requirements.)

On February 21, the administration issued a proposed rule -- "Short-Term, Limited-Duration Insurance" (PDF) (also available in different formats here and on the regulations.gov site, through which comments can be submitted). (Administration fact sheet.) The Feb. 21 proposed rule would permit insurers to sell short-term, limited-duration plans (STLDPs) that are effective for up to 12 months, unless state law is more limiting. Thus, these plans could essentially displace ACA-compliant plans for people who are not seeking robust insurance coverage. Policy experts believe that the availability of such plans will result in the removal of healthier individuals from the ACA- marketplace risk pools, and so the premiums for marketplace plans will increase over time and fewer ACA-complainant plans will be sold. (People who receive federal subsidies to purchase insurance will be protected from premium increases, since their subsidies will increase as well.) People who purchase the short-term plans may not realize how much they will have to pay out-of-pocket due to coverage limitations. Public comments on the proposed rule are due on April 23 and can be submitted at https://www.regulations.gov/document?D=CMS-2018-0015-0002.

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