HHS Short-Term, Limited-Duration Insurance Proposed Rule
Proposed Policy Changes
In October, President Trump issued an Executive Order instructing the Departments of Health and Human Services, Labor, and the Treasury to consider proposing regulations or revising guidance to promote healthcare choice and competition by expanding the availability of short-term, limited-duration insurance. As a direct result of this, the Departments issued a proposed rule on Tuesday, February 20, that would change the maximum duration of such coverage to less than 12 months, as opposed to the current maximum duration of less than three months.
Short-term, limited-duration insurance is a type of health insurance coverage that is designed to fill temporary gaps in coverage when an individual is transitioning from one plan or coverage to another form of coverage. This type of coverage is exempt from the definition of individual health insurance coverage under the Affordable Care Act (ACA) and is therefore not subject to the ACA provisions that apply to individual health insurance plans.
The proposed rule includes measures to help consumers who purchase short-term, limited-duration policies understand the coverage they are getting. The proposal would require one of two versions of a notice to appear in the contract and in any application materials that the plan is not required to comply with ACA provisions.
Providing Relief from Higher Rates and Limited Choice
Under the previous Administration, the Departments published a final rule in October 2016, which restricted short-term, limited-duration insurance to less than three months, further limiting consumer choice in a market where too many Americans cannot find affordable coverage that meets their health care needs. Average premiums have more than doubled from 2013 to 2017 in health plans on the Federal Health Insurance Exchange, and half of U.S. counties have only one insurance carrier to choose from.
Short-term, limited-duration insurance is generally more affordable than ACA-compliant plans. In the fourth quarter of 2016, a short-term, limited-duration policy cost approximately $124 a month compared to $393 for an unsubsidized ACA-compliant plan. Based on enrollment trends prior to the October 2016 final rule, the Departments project that approximately 100,000 to 200,000 additional individuals would shift from an ACA-compliant individual market plan to short-term, limited-duration insurance in 2019. Only about 10 percent of these individuals would have been subsidy-eligible if they maintained their Exchange coverage.
Expanding Access to More Affordable Options:
Today’s proposed changes are intended to provide additional, often much more affordable coverage options, while also ensuring consumers understand the coverage they purchase. Individuals and families who would benefit from this policy may include those:
- who are between jobs or other sources of coverage;
- who find ACA coverage too expensive or have seen their health insurance choices diminish; and
- whose doctors are not in network under ACA plans.
Longer limited-duration plans would also reduce the risk of a gap in coverage for people with short-term coverage who become seriously ill while covered. Under current rules, a person who becomes ill would likely not qualify for another plan less than three months in duration because of the illness and would then need to wait without coverage until the next year to gain coverage in the individual market.
CMS will accept comments on the proposed rule for 60 days. The proposed rule is available here: https://www.federalregister.gov/public-inspection.
Trump Administration works to give relief to Americans facing high premiums, fewer choices
Proposed rule to allow short-term, limited-duration insurance for longer periods providing increased choice at a lower cost
In direct response to President Trump’s October 2017 Executive Order, the Departments of Health and Human Services (HHS), Labor, and the Treasury (the Departments) issued a proposed rule today that is intended to increase competition, choice, and access to lower-cost healthcare options for Americans. The rule proposes to expand the availability of short-term, limited-duration health insurance by allowing consumers to buy plans providing coverage for any period of less than 12 months, rather than the current maximum period of less than three months. The proposed rule, if finalized, will provide additional options to Americans who cannot afford to pay the costs of soaring healthcare premiums or do not have access to healthcare choices that meet their needs under current law.
“Americans need more choices in health insurance so they can find coverage that meets their needs,” said Health and Human Services Secretary Alex Azar. “The status quo is failing too many Americans who face skyrocketing costs and fewer and fewer choices. The Trump Administration is taking action so individuals and families have access to quality, affordable healthcare that works for them.”
Short-term, limited-duration insurance, which is not required to comply with federal requirements for individual health insurance coverage, is designed to provide temporary coverage for individuals transitioning between healthcare policies, such as an individual in between jobs, or a student taking a semester off from school. Access to these plans has become increasingly important as premiums have more than doubled – PDF between 2013 and 2017 in health plans on the Federal Health Insurance Exchange. And half of the counties in America have only one insurance carrier to choose from.
“Americans who find themselves between jobs or simply can’t afford coverage because prices are too high will be helped by President Trump’s Healthcare for All Executive Order,” said Centers for Medicare & Medicaid Services (CMS) Administrator Seema Verma. “In a market that is experiencing double-digit rate increases, allowing short-term, limited-duration insurance to cover longer periods gives Americans options and could be the difference between someone getting coverage or going without coverage at all.”
This announcement builds on the President’s October 2017 Executive Order 13813, “Promoting Healthcare Choice and Competition Across the United States,” which directs the Departments to consider proposing regulations or revising guidance to expand the availability of short-term, limited-duration insurance and allow it to cover longer periods. The Departments published a final rule in 2016, which restricted short-term, limited-duration insurance to less than three months. Key stakeholders, including state regulators, have expressed concerns that the current limit could cause harm to some consumers, limit consumer options, and have little positive impact on the risk pools in the long run. Today’s proposed rule would address these concerns by reverting to the previous definition of short-term, limited-duration insurance which permits coverage for nearly a full 12 months.
A fact sheet on today’s proposed rule can be found here: https://www.cms.gov/Newsroom/MediaReleaseDatabase/Fact-sheets/2018-Fact-sheets-items/2018-02-20.html