Matthew Vicinanzo

On Tuesday, February 20, Department of Health and Human Services (HHS) Secretary Alex Azar announced that the agency intends to expand access to short-term, low-cost insurance policies. On Wednesday, HHS published its proposed rule, which promises to reduce restrictions on such limited-duration policies. The short-term insurance plans have fewer benefits and more limited consumer protections as compared to those proscribed by the Patient Protection and Affordable Care Act (ACA). While such short-term plans currently can only be carried for 90 days, the new proposal would extend that maximum coverage period to one year.

The proposed rule is in response to President Trump’s Executive Order from October 12, 2017, which called for HHS to expand access to low-cost insurance plans. The Executive Order asked the agency to explore the possibility of extending the maximum duration of such short-term, limited-duration plans in order to increase options for consumers. The short-term insurance plans are contemplated for individuals who are unemployed, between jobs, or otherwise looking to reduce premium costs for up to one year. The plans do not have to meet ACA requirements. Notably, they do not have to cover individuals with pre-existing conditions and they do not have to cover prescription drug plans. The plans offer more limited coverage for consumers, but impose less immediate financial burden through reduced premium cost. Insurers who sell the short-term plans would need to include clear statements on applications and plan documents that the coverage does not meet ACA requirements.

The proposed rule continues the Trump administration’s efforts to roll back the ACA and minimize its economic burden and comes just over a year after the president issued an Executive Order laying out that goal. It comes on the heels of earlier rules from the administration geared at stabilizing the individual and small group insurance markets. It also follows the signing of the new tax reform bill, which repeals the individual mandate of Section 5000A of the Tax Code and eliminates the shared responsibility payment for failure to obtain health insurance starting in 2019.

HHS’s goals for amending the rules around short-term, limited-duration health plans include making more affordable plans available for consumers and in a wider variety of coverage options. The change is also intended to foster competition among insurance plans to drive down premiums for ACA-compliant plans. Finally, HHS insists that the basis for the proposed rule is to increase choice for consumers, many of whom may face limited options for cheaper health insurance.

Opponents of the rule claim that it allows for “junk” insurance plans with inadequate coverage. They claim that it will leave consumers holding the bag on healthcare costs for treatments, drugs, and procedures that are not covered by the low-cost plans. The proposed rule could undermine the ACA exchanges by draining young and healthy individuals—who are more likely to sign up for the short-term plans—from the ACA-compliant plans. HHS seeks comment regarding the impact the rule would have on such plans. California has already proposed measures to counteract the proposed rule by banning such ACA non-compliant plans in that state. In January of this year, a bill was introduced in California that would prohibit the sale of short-term health insurance plans there beginning in 2019.

There is uncertainty as to how this proposed rule will affect the insurance marketplace and ultimately the cost of both ACA-compliant and non-compliant plans. There is also speculation that the maximum duration of the short-term, limited-duration plans could be further extended by allowing for renewal of the plans beyond one year. This option for renewal was suggested in the October 12, 2017 Executive Order. Comments from interested parties on the proposed rule must be submitted to HHS by April 23, 2018.