This morning, the department of Health and Human Services (HHS) published a proposed rule to expand the availability of short-term, limited-duration health insurance plans to increase affordable coverage options for Americans. The proposed rule was released in response to the October 12th Executive Order, signed by President Trump, which directed federal agencies to propose ways to expand access to short-term plans.
How would the proposed rule work?
If adopted, the proposed rule would allow insurers to sell short-term plans for coverage periods of up to a year. The current maximum, set by the Obama administration, is three months. Short-term health insurance plans are typically less expensive than traditional plans, but do not cover pre-existing conditions. This can cause problems for people who acquire a longer-term illness, since the short-term plan is completely terminated at the end of the coverage period.
Along with the release of the proposed rule, CMS highlighted the potential cost savings that the new short-term plans would provide for consumers, stating, “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.”1
Critics of the new rule are less optimistic. In December, a group of healthcare associations, led by America’s Health Insurance Plans (AHIP) sent a letter to state insurance regulators warning of the potential problems with relaxing the rules on short-term plans. The letter stated short-term policies will draw healthy people away from the health law’s insurance markets, potentially making them less stable and raising subsidy costs for taxpayers.
HHS is also exploring whether the plans should have guaranteed renewal, which means insurers would have to renew policies after a year, as long as premiums are paid. HHS said it is providing options to those who are currently uninsured but expects between 100,000 and 200,000 people who are currently insured on the Individual Market to switch to the short-term policies.
What happens next?
Before the proposed rule can be enacted, it must go through the standard 60-day comment period where industry stakeholders can review and submit feedback. After the comment period closes, the agency will review the comments and decide whether to incorporate any of the feedback into the final version of the rule. Next, agencies decide whether to proceed with the rulemaking process and issue a new or modified proposal.