As part of the Trump administration’s efforts to deregulate the health insurance market, HHS & the Department of Labor have promulgated new rules to increase the availability of short-term health insurance plans to fill gaps in health coverage. The Trump administration has begun to reverse limits on short-term, or “skinny,” health insurance plans implemented by the Obama administration. The rule reversal would allow individuals to purchase short-term plans lasting up to 12 months and that can be renewed for up to 36 months. The Obama regulation, which went into effect in 2016, prohibited short-term plans from lasting more than 90 days in order to push healthier people onto plans offered through, or compliant with, the Affordable Care Act. The executive order will go into effect before the next enrollment season for Obamacare opens on November 1.
Both providers & insurers worry skinny plans aren’t regulated well enough, as they do not comply with the ACA, which was passed in 2010. They are concerned that consumers will purchase the insurance and discover they are sparsely covered only when they begin incurring large medical costs that turn out not to be covered by the short-term plans. Another concern among skeptics is that short-term plans may exclude patients with pre-existing conditions. Others worry that the short-term plans could destabilize the already precarious individual market by pulling healthy people away from ACA pools, raising costs and limiting access for unhealthy people who are no longer subsidized by healthier buyers. The most recent administration estimate for lost enrollment due to the new rule is 500,000 next year, but other organizations have predicted up to a 2.1-million-person enrollment drop. Meanwhile, the Trump administration has estimated that 500,000-600,000 people will enroll in short-term plans next year.
Proponents of the move point to cheaper plans and more options. They also provide an opportunity for middle-income individuals who make too much to qualify for Obamacare subsidies, but can no longer afford insurance due to spiking premiums, to purchase at least some coverage. The plan should also help to reduce the cost of insurance for healthy people, as some skinny plans cost as much as 80% less than the least expensive ACA plans.
States will now be in charge of regulating short-term plans, and many have passed laws this year anticipation of the regulatory change.
On April 2, Iowa Governor Kim Reynolds signed Senate File 2349 into law, allowing Wellmark Blue Cross and Blue Shield to partner with the Iowa Farm Bureau Federation to sell short-term health insurance plans. Amendments allowing other carriers to offer similar plans were not approved by the state legislature, so companies like Medica, the state’s only carrier selling individual plans, will not be able to take advantage of the new law. The bill also increases the ability of small businesses to band together to buy insurance. State officials consider the legislation a temporary plan while they wait for Congress to come up a more permanent solution the country’s broader health problems.
On April 10, Maryland Governor Larry Hogan signed House Bill 1782 into law as a compromise meant to stabilize the state’s fragile insurance market after changes to the ACA were made at the federal level. The bill, sponsored by Delegate Joseline Pena-Melnyk, revives through a state tax the 2.75% insurer provider fee that was excused by Congress for a year. The law also defines conditions under which short-term health plans may be sold; regulating them similarly to how the Obama administration did by limiting them to 3-month plans that may not be extended or renewed.
Vermont, which does not have any short-term plans for sale at present, recently restricted short-term plans to up to 3 months in length with no option for renewal, among other conditions. It requires insurers that provide short-term plans file their advertising materials, rates, and forms with the state, and work with the Commissioner in other ways to ensure the insurance plans are beneficial for consumers. The law, H 892, was signed by Governor Phil Scott on May 16.
On June 21, the New York Department of Financial Services circulated a letter reminding insurers that short-term health insurance plans are prohibited in the state regardless of changes to federal law. All health insurance plans sold in New York must be ACA compliant.
HB 1520, introduced by Angus McKelvey, was signed into law on July 11 by Hawaii Governor David Ige. The law limits the sale of short-term health plans to those who were not eligible for insurance through the federal marketplace in the last year. This essentially prohibits the sale of short-term plans, as the only people ineligible to buy insurance through the federal marketplace are undocumented immigrants, incarcerated citizens, and people eligible for Medicare Part A. Those remaining few who are eligible for short-term plans may not purchase short-term plans that last longer than 90 days.
The California legislature is deliberating on SB 910, which would prohibit out-right the sale of short-term plans, making it only the 3rd state to do so. The bill, which was introduced by state Senator Ed Hernandez, passed the Senate with 27 “yes” votes and 10 “no” votes, and is currently being discussed in the state Assembly. According to a fact sheet on the bill provided by Hernandez, the state is worried too many young, healthy people will jump on the cheap, short-term plans and only switch to ACA plans after they develop more serious medical conditions, thus undermining the ACA market.
Virginia Governor Ralph Northam vetoed SB 844, which would have allowed insurers to sell short-term plans lasting up to 364 days. In Missouri, HB 1685 died in the Senate after passing the House and would have increased the maximum length of short-term plans from 6 months to less than a year. In Minnesota, too, a bill that would have expanded access to short-term plans died in the Senate after passing the House. Where current Minnesota law limits the duration of short-term plans to 185 days with no more than 365 days of short-term coverage in a 555-day span, the failed bill would have allowed such plans to last just less than a year and have done away with the 365 out of 555-day limit.