On Tuesday, February 20, the Department of Health and Human Services (HHS) released a long-awaited proposed rule that would change an Obama administration rule that curtailed short-term, limited-duration health insurance (STLDI) plans.  The HHS press release stated, “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.”

President Trump’s Executive Order stated, “STLDI is exempt from the onerous and expensive insurance mandates and regulations included in title I of the PPACA [The Patient Protection and Affordable Care Act].  This can make it an appealing and affordable alternative to government-run exchanges for many people without coverage available to them through their workplaces.  The previous administration took steps to restrict access to this market by reducing the allowable coverage period from less than 12 months to less than 3 months and by preventing any extensions selected by the policyholder beyond 3 months of total coverage.”

Why did the Obama administration limited these policies?  Too many people were buying them as an alternative to PPACA, or Obamacare.

These plans are less expensive because they do not have to comply with ACA regulations such as guarantee issue or the 10 essential health benefits, the main policy directives that have driven up the cost of insurance premiums since 2013.  HHS stated in a fact sheet that the “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.”

The rule will require insurers to write into a health insurance contract something similar to the following and in large type:

THIS COVERAGE IS NOT REQUIRED TO COMPLY WITH FEDERAL REQUIREMENTS FOR HEALTH INSURANCE, PRINCIPALLY THOSE CONTAINED IN THE AFFORDABLE CARE ACT. BE SURE TO CHECK YOUR POLICY CAREFULLY TO MAKE SURE YOU UNDERSTAND WHAT THE POLICY DOES AND DOESN'T COVER. IF THIS COVERAGE EXPIRES OR YOU LOSE ELIGIBILITY FOR THIS COVERAGE, YOU MIGHT HAVE TO WAIT UNTIL AN OPEN ENROLLMENT PERIOD TO GET OTHER HEALTH INSURANCE COVERAGE. ALSO, THIS COVERAGE IS NOT “MINIMUM ESSENTIAL COVERAGE”. IF YOU DON'T HAVE MINIMUM ESSENTIAL COVERAGE FOR ANY MONTH IN 2018, YOU MAY HAVE TO MAKE A PAYMENT WHEN YOU FILE YOUR TAX RETURN UNLESS YOU QUALIFY FOR AN EXEMPTION FROM THE REQUIREMENT THAT YOU HAVE HEALTH COVERAGE FOR THAT MONTH.

With Congress repealing the tax on the individual mandate, it is expected even more Americans may sign up for these plans.  Of course, the administration reversing the Obama-era rule has sent Obamacare fans into a tizzy.  House Democratic Leader Nancy Pelosi (D-Calif.) said, “Americans purchasing these shoddy, misleading short-term Trumpcare plans will be one diagnosis away from disaster, discovering they have been paying for coverage that may not cover basic care such as cancer treatment, preventative care or maternity care.”  (Perhaps Ms. Pelosi does not realize that single men may not want to be forced to pay for maternity care, but, I digress.)

The Wall Street Journal, which supports the policy, noted in its February 20 editorial, “HHS is seeking comment on the proposal, including whether to make the plans renewable.  Renewability is crucial if the Trump Administration wants these options to function as a market.  Patients want to know they’ll be able to keep coverage if they get sick, which insurers can price into premiums.”  CAGW plans to submit a comment recommending this action.

CAGW agrees with the Wall Street Journal’s assessment that, “the GOP would be in a far better spot if Congress had repealed and replaced ObamaCare.  But for now, the Administration is making progress on choice for Americans.”