On July 17, 2020, in a 2-1 decision, the U.S. Court of Appeals for the D.C. Circuit upheld a Trump Administration rule that expands the scope of short-term limited duration insurance (STLDI) plans, affirming the lower court’s opinion that STLDI plans do not violate the Affordable Care Act. Ass’n for Cmty. Affiliated Plans v. U.S. Dep’t of Treasury , D.C. Cir. App., No. 19-05212 (July 17, 2020).
The rule’s genesis can be traced to an Executive Order issued in October 2017, which aimed to expand the availability of STLDI plans, seen by the Administration as more “appealing and affordable” than plans mandated by the ACA. The order tasked the Departments of Treasury, Labor, and Health and Human Services with expanding the duration of STLDI plans from three months to twelve. The changes also provide for renewals of those plans, which can amount to continuous coverage for up to three years.
While the Trump Administration’s stated intention was to offer more choices to consumers, and increased competition, 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), arguing that STLDI plans, which do not comply with ACA coverage requirements, are less expensive because they are not as comprehensive, and will therefore draw young, healthy individuals away from the single risk pool intended by the ACA, resulting in higher premiums for plans in compliance.
The U.S. District Court for the District of Columbia granted the government’s motion for summary judgment, holding that the new rule constituted a reasonable interpretation of HIPAA and the ACA, and was not arbitrary and capricious. The Association for Community Affiliated Plans (ACAP) appealed. Judge Thomas Griffith, writing for the D.C. Circuit, affirmed the lower court’s decision.
Judge Griffith first noted that the phrase “short-term limited duration” is ambiguous. Ass’n for Cmty. Affiliated Plans, D.C. Cir. App., No 19-05212 at 10. The phrase does not appear in the ACA, but rather is incorporated by reference to HIPPA’s definition of “individual health insurance coverage,” which excludes “short-term limited duration insurance.” Id. at 9. Under the Chevron doctrine, the D.C. Circuit needed only to find that the government’s interpretation of “short-term limited duration insurance” was “based on a permissible construction” of HIPAA and the ACA to affirm the lower court’s decision. Id at 10 (citing Chevron USA, Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837, 842-43 (1984)).
ACAP argued that the ACA specifically exempts from the individual mandate people who experience coverage gaps of “less than 3 months,” and that Congress therefore meant for the three-month time span to apply to the interpretation of “short-term coverage” that the ACA adopted from HIPPA.
The court disagreed, stating that if Congress intended to apply a three-month time frame, as it did with coverage gaps, it would have done so for STLDI plans. Id. at 10-11. As such, without contrary instruction from Congress, the government had the discretion to define as “short term” any policies shorter than the standard one year policy term. Id. at 11.
The court rejected ACAP’s argument that the STLDI Rule violates both the structure and the policy of the ACA, concluding that the Rule does not create a new type of insurance policy, but instead simply clarifies which policies are exempt from ACA mandates, as provided for by Congress. Id. at 13.
The court also rejected ACAP’s claim that the government’s expansion of STLDI plans would compromise the stability of the individual insurance market. The court pointed to slight decreases in premiums in 2019 and 2020 to conclude that the government was reasonable in its prediction that the STDLI Rule’s impact on Exchange enrollment would be softened by federal subsidies. Id. at 18.
Finally, the court concluded that the government’s revision of STLDI scope was not arbitrary and capricious because the government took into consideration the possibility that the expansion of STLDI plans would result in a spike in premiums for ACA-compliant plans. The government’s belief that the impact on premiums would be minimal, compared to the broadening of coverage for those unable to afford ACA-compliant plans, was sufficient for the court to hold that the government had acted within its discretion. Id. at 18-20.
In her dissent, Judge Judith Rogers, criticized the STLDI rule as an “alternative class of primary health insurance” born of the Trump Administration’s dissatisfaction with the statutory mandates of the ACA and its inability to repeal it. Judge Rogers pointed to the Rule’s significant departures from the ACA, which invite a market in which insurers can deny basic benefits, discriminate based on age and health status, and refuse coverage to older individuals and those with pre-existing condition – problems, she notes, that existed before the enactment of the ACA, and which the ACA set out to resolve.
The D.C. Circuit’s decision is a long-awaited victory for President Trump, who tried, but failed, to repeal the ACA immediately upon his ascension to office. While the government awaited the ruling of the courts, several states reacted by enacting laws restricting the duration of STLDI plans, while others updated their laws to align with the Trump Administration’s Executive Order.