Potentially overlooked between the enactment of the Families First Coronavirus Response Act (the FFCRA) on March 18 and the Coronavirus Aid, Relief, and Economic Security Act (the CARES Act) on March 27, the U.S. Court of Appeals for the District of Columbia Circuit heard oral argument via teleconference on March 20 in Ass’n for Cmty. Affiliated Plans v. U.S. Dep’t of Treasury, No. 19-05212 (D.C. Cir. July 30, 2019). At issue in that case is the fate of a Trump Administration rulemaking expanding the scope of non-ACA compliant short-term limited duration insurance (STLDI) plans. Already controversial—with some arguing that STLDI plans increase access to health care, while others decry them as misleading consumers and destabilizing the individual insurance market—STLDI plans are of particular import given the COVID-19 pandemic.
As millions face unemployment, lose access to employer-sponsored health insurance coverage, and qualify to seek coverage via a special enrollment period, others may look to STLDI policies to obtain at least some coverage in the wake of COVID-19. But, as with ACA requirements such as essential health benefits and community rating, STLDI plans are not subject to the recently enacted zero-dollar cost-sharing and other coverage requirements for COVID-19 diagnostic testing.
Enacted in response to the COVID-19, Section 6001 of the FFCRA, as amended by Section 3201 of the CARES Act, requires that health insurance issuers and group health plans cover COVID-19 diagnostic testing during the national emergency without any cost-sharing (co-payments, coinsurance, and deductibles), prior authorization, or other medical management requirements. Likewise, CARES Act Section 3202 generally requires health insurance issuers and group health plans to reimburse providers of diagnostic testing at either the provider’s contracted rate or, if there is no contract rate, the provider’s publicly listed cash price for the testing. But recent guidance confirms what was plain from the statutory text—FFCRA Section 6001, to which both the CARES Act Sections 3201 and 3202 apply—“does not apply to short-term, limited-duration insurance . . . .” Presumably, Congress could have drafted the FFCRA and CARES Act to include STLDI had it been so inclined.
Against this rapidly evolving backdrop, the D.C. Circuit’s questioning during oral argument suggests that it may uphold the trial court decision permitting the Trump Administration’s expansion of STLDI plans.
In September 2018, seven organizations representing health plans, providers, and patients, filed suit, Ass’n for Cmty. Affiliated Plans v. U. S. Dep’t of Treasury, 392 F. Supp. 3d 22 (D.D.C. 2019), in response to a final regulation that, inter alia, extended short-term coverage from three to twelve months and permitted renewals or extensions up to a maximum total coverage period of 36 months. The rulemaking implemented directives from an October 2017 Executive Order calling for the Departments of Health and Human Services, Labor, and Treasury to make STLDI plans more accessible because they are “appealing and affordable alternatives,” to ACA-mandated plans, and, therefore, expand the choices offered to consumers, and increase competition.
STLDI plans traditionally served to bridge the coverage gap for individuals during life events like unemployment, enabling access to short term coverage with more limited benefit design than required under the ACA. The appellants argued that one key purpose of the ACA is to create a single risk pool that includes virtually everyone in the individual health insurance market. Longer STLDI plan terms, they argued, will draw younger, healthier individuals away from that risk pool toward plans that are not required to provide the 10 essential health benefits that the ACA mandates (including mental health and substance abuse treatment, emergency services, maternity care, and prescription drugs). As a result, ACA-compliant plans would be forced to compete with less expensive short-term alternatives at an unfair disadvantage due to the added cost of providing for essential benefits. This also could destabilize the individual insurance market as healthier enrollees opt for cheaper STLDI plans, leaving sicker enrollees in the individual market—a phenomenon known as “adverse selection”—which could drive up premiums and otherwise impair the efficiency and cost-effectiveness of the individual market.
Judge Gregory Katsas, appointed by President Trump, asked why short-term policies were not a sound alternative for those unable to afford ACA-compliant plans and who do not qualify for federal assistance. He expressed confusion at the idea that Congress, which passed the ACA to increase the number of insured Americans, would rather people have no insurance at all than have short-term coverage with limited benefits.
Appellants argued that Congress codified within the ACA its judgment that all individuals should be covered for essential health benefits to ensure adequate access to necessary health care. In practice, this policy would reduce the risks created by benefit caps, high out-of-pocket maximums, and plans that can exclude applicants with pre-existing conditions, all of which are available to insurers under STLDI plans, and none of which are permitted under ACA-compliant plans.
Judge Thomas Griffith, appointed by President George W. Bush, did not appear convinced that the ACA, in fact, has the purpose of creating a single risk pool, noting that, although it clearly intended to create “one very large risk pool,” at present “at least two other exceptions with fixed indemnity insurance and grandfathered plans” exist. Griffith also was skeptical that the creation of a third exception in the form of longer-term STLDI plans would lure millions of people away from ACA-compliant plans and lead to a 5% increase in the costs of ACA-compliant plans as Appellants claim.
Appellants also argued that a twelve-month STLDI term cannot be considered “short-term” when a standard term of insurance is one year long. Appellants further contended that offering extensions of coverage amounting to a term of three years contravenes the plain meaning of the statutory text, which they argue makes STLDI plans one-time, non-renewable options.
Judge Judith Rogers, appointed by President Bill Clinton, wondered whether Congress actually delegated to the administration the authority to expand the definition of short-term limited duration insurance plans. Representing the federal government, attorney Daniel Winik responded that, the Departments have delegated discretion to define the phrase because it was left undefined by the statute. In earlier comments, Judge Rogers told Winik that his arguments have “considerable strength to them,” seemingly adding to the likelihood that the D.C. Circuit will affirm the district court’s ruling in favor of the Trump Administration’s expansion of STLDI plan terms.
While the Executive Order may be upheld in court, many states (e.g., California, Hawaii, and Colorado) have responded with restrictions on STLDIs such that short term plans are unavailable to customers in those states, either due to financial disincentives, or outright prohibition. Many other states have limited the maximum duration of short-term plans often to lengths of three or six months, and several restrict short-term plan renewals. Currently, more than half of states place some form of restriction on STLDI plans.
By contrast, a few states (Indiana, Oklahoma, and Arizona) have updated their laws on STLDI plans in accordance with the Trump Administration’s Executive Order, and a few more states (Indiana, Missouri, and Virginia) have seen bills drafted to follow suit, but without successful enactment.