California Governor Jerry Brown signed Senate Bill 910 into law late last week, forbidding the sale of short-term health plans, several months after the Trump Administration released new rules extending the policy.
The Trump Administration vastly expanded short-term plans in August, reversing the Obama Administration's previous effort to limit the policies to three months. These plans will soon have a 12-month enrollment limit with the ability to renew the coverage for up to 36 months. Traditionally, these plans have been used to bridge a coverage gap for several months until the next available open-enrollment period. The Administration’s new rule suggests that these short-term plans are now a more affordable alternative to ACA plans sold on the exchange. These plans can be much cheaper than ACA plans as they are not subject to the same consumer protections, such as essential health benefits.
Critics of the expansion say short-term plans only offer an illusion of coverage, as enrollees often do not realize how limited their policy is until it’s too late. California State Senator Ed Hernandez, sponsor of Senate Bill 910, stated that “these short-term policies are dangerous because they subject people to huge healthcare bills, barely cover any services and give people a false sense of security.” California now joins states such as New York and New Jersey in prohibiting short-term plans from being sold. In addition, a number of states have proposed restricting short-term plans (for instance, Illinois proposed limiting the plans to less than six months) in response to the Administration's final rule, but California was the only state to pursue an all-out ban.
Concerns regarding the ban on short-term plans that California has put in place is that the true purpose of short-term plans will be stifled. The intent of short-term plans was to offer some type of coverage to bridge the gap that consumers may experience when losing employer-sponsored coverage or for consumers who may have lost coverage for some reason, don’t qualify for a special enrollment period and need some type of coverage while waiting for the next open-enrollment period. Consumers experiencing these gaps in coverage in California will now be denied the opportunity to purchase short-term plans and will have to go without coverage until they obtain employer-sponsored coverage, have a change in circumstances triggering a special enrollment period, or be forced to wait until the next open-enrollment period in order to be able to enroll in coverage. Many of these concerns were expressed by the California Association of Health Underwriters as well as other consumer-protection groups but were ultimately disregarded by the California legislature when passing S.B. 90.