Skip to main content

Analysis

Short-Term Health Plans Allowed Up to 3 Years

By Steven Porter  
   August 01, 2018

A final rule expands access to non-ACA-compliant plans, which the Trump administration has touted as cheaper alternatives to full coverage.

Beginning this fall, consumers will be allowed to buy short-term limited-duration health plans renewable for up to three years, the Trump administration announced Wednesday morning with a newly finalized rule.

The policy change expands access to lower-grade coverage options the Obama administration had restricted to three months, without a renewal option, in light of the Affordable Care Act. The looser rules finalized Wednesday allow terms up to 12 months, renewable up to 36 months.

While critics contend the short-term options will pull younger healthier beneficiaries out of ACA-compliant exchange plans, driving up premiums for sicker populations left behind, the administration says any negative effects will be minimal and outweighed by the market benefits of having more options.

James Parker, MBA, a former Anthem executive who serves as director of the Health and Human Services Office of Health Reform and as one of four key senior advisors to HHS Secretary Alex Azar, said the administration doesn't expect a mass exodus from the ACA exchanges to these short-term options.

"What we do believe, however, is that there will be significant interest in these policies from individuals who today are not in the exchange and, in many cases, have been priced out of coverage as insurance premiums have significantly increased over the past four to five years," Parker said during a call with reporters Tuesday evening.

Randy Pate, a deputy administrator of the Centers for Medicare & Medicaid Services who oversees individual and small-group markets as director of the Center for Consumer Information and Insurance Oversight, said the administration expects about 600,000 people to enroll in the short-term plans next year as a result of the expanded access. Only an estimated 200,000 will leave the exchange market in 2019 as a result of the final rule, he said.

As the increased enrollment in short-term plans swells to an estimated 1.6 million in 2021 and 2022, however, the number of participants expected to leave the ACA exchanges as a result of the final rule is projected to swell to 600,000, according to a 10-year impact analysis included in the final rule.

This shift is expected to increase gross premiums for exchange plans by 1% next year and 5% in 2021. Because this change is expected to result in fewer unsubsidized enrollees on the exchanges, net premiums are projected to decrease 6% next year and 14% in 2021. (This net decrease would not affect the amount paid by individual consumers.)

  • The wrong direction? When the administration announced its plans earlier this year to expand access to short-term coverage options, American Hospital Association President and CEO Rick Pollack called it "a step in the wrong direction for patients and health care providers." If consumers are unaware of the limits on their skimpy coverage, it could ultimately drive bad debt for hospitals, he said.
     
  • Disclosure requirements beefed up: The final rule includes additional language to make sure consumers know what they are buying, Pate said. "We fully recognize these products are not necessarily for everyone, but we do think they will provide an affordable option to many, many people who have been priced out of the current market under the Obamacare regulation," he said.
     
  • There's an opportunity for insurers. As consumers gain interest in their short-term options, insurers will have an opportunity to meet the rising demand. "The impact is going to vary depending on the insurer, whether this is a business they have been in in the past and whether they have been longing to get back into it when consumer interest reached an acceptable level," Christopher Holt, director of healthcare policy with D.C.-based think tank American Action Forum, told HealthLeaders Media. "There also could be some who see it as a new opportunity to claim a share of the marketplace they're not reaching."
     
  • But insurers have some skepticism. Matt Eyles, president and CEO of America's Health Insurance Plans, wrote a letter to HHS in April. "We are concerned that substantially expanding access to short-term, limited duration insurance will negatively impact conditions in the individual health insurance market, exacerbating problems with access to affordable comprehensive coverage for all individual market consumers," Eyles wrote. In a follow-up statement Wednesday, Eyles said AHIP remains concerned that consumers who enroll in these plans will be stuck with high medical bills, but he commended the final rule's clearer disclosure requirements and deference to state-level regulatory authority.
     
  • Trump administration boosters: Beyond simply opening a door to longer short-term plans, the Trump administration has touted these and other non-ACA-compliant options as viable rescue mechanisms for individuals squeezed by rising premiums. Navigators, who have been tasked in past years with helping people sign up for exchange coverage, will now be encouraged to provide information on short-term and association health plans as well.
     
  • States can block: The final rule released Wednesday addresses the federal government's definition of short-term limited-duration health insurance, but states retain the authority to impose stricter regulations, Pate said. They can limit or even ban the plans altogether.
     

While lawmakers seem to have backburnered their aspirations for broad healthcare reform in the near-term, Parker said the administration will continue taking incremental steps to improve affordability of coverage.

Editor's note: This story was updated to include additional information from AHIP President and CEO Matt Eyles and the 10-year impact analysis from the final rule.

Steven Porter is editor at HealthLeaders.


KEY TAKEAWAYS

Only about 200,000 people are expected to exit the ACA exchange market as a result of the final rule.

Gross premiums for marketplace plans are expected to rise 1% next year attributable to this policy change.

The administration notes that 'these products are not for everyone,' so buyers should review their options carefully.


Get the latest on healthcare leadership in your inbox.