On Monday, NAHU submitted comments to the Departments of Labor, Treasury, and Health and Human Services on the 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 Trump Administration proposed restoring the maximum duration of these plans to up to 12 months as long as their sale was accompanied by revised consumer disclosures. NAHU noted our support of expanding coverage options to consumers, but advocated for a shorter duration window, stressed that consumers should be fully aware of the limitation of these policies, and advised that the federal government should defer to and coordinate with state regulators on the implementation of the rule.
The proposed rule was created in response to an executive order issued by President Trump on October 12, 2017, directing federal agencies to expand the availability of STPs, association health plans and Health Reimbursement Arrangements. The proposal on STPs would effectively end the policy established by the Obama Administration in 2016, and would extend eligibility for the plans from a maximum of three months to up to 364 days as previously permitted, with the ability to renew coverage at the end of that period.
In our comments, we noted that our primary preference is for individuals to maintain year-round comprehensive coverage, but recognized that STPs at least allow individuals to purchase some type of medical and financial protection for the majority of the year. However, we also believe that STPs will expand in popularity beyond those who are just simply seeking to fill a temporary coverage gap, particularly by those who are not purchasing traditional coverage due to limited choices and high prices. These consumers who are healthier and leave the individual market may cause further instability in the individual market risk-pool.
We requested that the departments consider ways to avoid bifurcating the individual market between healthy and sicker individuals, and to balance the needs of providing an affordable and sufficient coverage option with the needs of consumers who are truly experiencing a coverage gap. We suggested that rather than expanding the availability to just under one year with the ability to renew, that instead the maximum duration be set to either six months, with one full renewal cycle or to six months with a renewal to January 1, whichever is shorter. Further, to help consumers considering these products, we suggested expanding the Summary of Benefits and Coverage (SBC) to better describe the attributes of these policies so that enrollees fully understand what these plans cover and what they don’t so they aren’t surprised when seeking treatment and incurring costs.
We additionally suggested that the federal government should defer to states for primary responsibility of regulating STPs. We noted that the National Association of Insurance Commissioners (NAIC) is in the process of improving model legislation and a model regulation establishing minimum standards for limited-duration policies, excepted benefits and other health coverage traditionally under the complete purview of state regulation. The federal government should coordinate with the NAIC to ensure that any final rule is harmonious with its efforts since many states will look to the NAIC’s work for guidance on these plans.