On Tuesday, the Labor Department, Treasury Department and HHS jointly released a proposed rule on the expansion of short-term limited duration insurance (STLDI), also referred to by many in the industry as short term plans (STPs). The rule was in response to an executive order issued by President Trump on October 12 directing federal agencies to expand the availability of STPs, association health plans and Health Reimbursement Arrangements. The proposal effectively ends the policy established by the Obama Administration in 2016, and would extend eligibility for the plans from a maximum of three months to less than 12 months, with the ability to renew coverage at the end of that period. NAHU plans to submit detailed comments on the proposal, which are due in late April.
The proposed rule would restore the maximum duration of STPs to up to 364 days as previously permitted. The rule would continue to prohibit individuals from renewing coverage without the issuer’s consent on a guaranteed-renewable basis, although it would begin permitting renewals with consent. Therefore, while insurers would not be required to offer guaranteed-renewable coverage of STPs, individuals could re-apply for coverage and resubmit to underwriting for that policy. The proposal includes guidance with regard to the elimination of the individual mandate penalties, noting that insurers would still be required to clearly disclose that these plans do not satisfy the requirement for minimum essential coverage (MEC), with the elimination of penalties noted for plans sold after January 1, 2019. It is important to remember that even though the tax reform bill passed in December 2017 effectively zeroed out the individual mandate penalties, this does not go into effect until January 1, 2019.
NAHU has expressed concerns with the shortened window of STPs established by the Obama Administration. We specifically noted that health insurance coverage is a financial-protection product and individuals who miss the open-enrollment period window should be able to purchase some type of medical and financial protection for the majority of the year. We argued that it worsened the potential for fraud with special enrollment periods and further limited coverage choices for consumers seeking to close a gap in coverage without the intention of seeking individual market coverage. We also contended that the Obama Administration’s rule overstepped the states’ responsibility in regulating these plans and noted our preference for federal rulemaking that would restore the power to states to regulate the sale of these plans, including by establishing their own limits for maximum duration.
Among our main concerns with any policy proposal is to not add to the ongoing instability in the individual marketplace. To that end, we have some concerns with the Trump Administration’s proposal to extend these plans, coupled with the elimination of the individual mandate penalties. We are concerned that this could increase the potential of market instability as younger, healthier individuals leave marketplace coverage in favor of less expensive STPs. As the pool of individuals remaining in ACA-compliant marketplace coverage possibly skews older and sicker, these plans are likely to become ever-increasing in price and threaten the overall viability of this market.
NAHU will be working with members of the Legislative Council and Individual Working Group to provide comments to HHS as well as examples of best practices already in place for STLDI that could be reinforced through the proposed rule in order to provide comments that will assist the Administration in compiling a final rule that will improve the market.