In a victory for the Trump Administration, on July 18, 2019, the United States District Court for the District of Columbia upheld a 2018 regulation designed to expand the sale of short-term, limited duration insurance policies and rejected claims that the regulation unlawfully undermined the Affordable Care Act (“ACA”) and would destabilize the ACA marketplaces. Plaintiffs have indicated that they will appeal the decision.

Short-term, limited duration insurance policies are not required to comply with ACA protections, including those relating to essential health benefits like maternity care and prescription drugs. Originally designed to fill very short gaps in coverage, these types of plans were not included in the definition of individual health insurance under the ACA. These short term policies can be designed with high out-of-pocket maximums, low coverage caps, and significant benefit gaps. They can also deny coverage to those with pre-existing conditions. For these reasons, these policies can be marketed at a lower cost. Plaintiffs representing insurers, providers, and consumer groups sued the administration arguing that the availability of short term plans would draw away younger and healthier individuals from risk pools and put insurers at an unfair disadvantage by forcing them to compete with short term plans that would not be required to comply with the same ACA protections.

Under a 2016 regulation supported by the Obama administration, this type of short-term coverage was limited to a maximum period of three months, and all policies were required to state that they did not qualify as minimum essential coverage and did not comply with the ACA’s individual mandate. This regulation was promulgated due to concerns that short-term policies were being deceptively marketed as comprehensive coverage and that young and healthy individuals were leaving the ACA marketplaces for these cheaper plans.

However, in October 2017, President Trump issued an Executive Order that directed the Departments of Health and Human Services, Labor, and Treasury (the “Departments”) to expand access to short-term plans, association health plans, and health reimbursement arrangements. The Executive Order stated that short-term plans are “appealing and affordable alternatives” that can increase consumer choice and competition because they are not restricted by the requirements of the ACA. In response, in August 2018, the Departments finalized a regulation that extended short-term coverage from three to twelve months. The rule also permitted renewals or extensions up to a maximum total coverage period of 36 months.

On September 14, 2018, seven organizational plaintiffs filed suit against the Departments on the basis that the final rule is contrary to the ACA. The challengers expressed concern that the rule would inflict serious harm on insurers and marketplaces by causing lower risk individuals to exit the marketplaces. In doing so, they argued that premiums would be increased for those remaining, in particular those with pre-existing conditions.

In his decision on July 18, U.S. District Judge Richard Leon rejected these claims and granted summary judgment in favor of the Departments. As described in a previous alert, four months ago, U.S. District Judge John D. Bates of the same court issued a decision that rejected the administration’s attempts to increase access to association health plans, also an objective in the October 2017 Executive Order, saying that the regulation “was intended and designed to end run the requirements of the ACA . . . by ignoring the language and purpose of both ERISA and the ACA.”

We continue to monitor developments on these cases and the impact they will certainly have on the state of health care coverage.