Today, the Department of Health and Human Services (HHS), the Treasury Department, and the Labor Department issued a final rule that will provide more lower cost options for Americans in purchasing health insurance.  HHS Secretary Alex Azar said, “Under the Affordable Care Act, Americans have seen insurance premiums rise and choices dwindle. President Trump is bringing more affordable insurance options back to the market, including through allowing the renewal of short-term plans.  These plans aren’t for everyone, but they can provide a much more affordable option for millions of the forgotten men and women left out by the current system.”

The rule allows for the expansion and renewal of short-term, limited-duration (STLD) health insurance plans.  These plans are not required to conform with the Patient Protection and Affordable Care Act’s (ACA), better known as Obamacare, expensive requirements such as the ten essential benefits or guaranteed availability or renewability.  It is expected the STLD plans will play an important role in in providing temporary healthcare coverage to millions of Americans, especially those that cannot get a government subsidy in an ACA exchange because their income is too high.

What kind of savings can consumers expect?  One only needs to look back in history before an Obama administration rule limited the length of time for a STLD plan to 3 months.  Back in 2016, when consumers could purchase a STLD plan for longer periods, the average monthly premium for an individual was approximately $124 compared to $393 for an unsubsidized Obamacare compliant plan.  That was a savings of 70 percent!

The Obama rule was harmful to consumers.  After the three months were over, a person would have had to re-apply for the plan, would likely have seen their deductible reset, and face new underwriting.  It was done to force people into an Obamacare exchange.  Many Americans chose to go uninsured instead.

The new rule reverses the Obama rule, which was issued in late 2016 and took effect in 2017.  Now insurers will be allowed to market a STLD plan that provides coverage to just under 12 months and to extend their plans to customers up to a maximum duration of 36 months.  This extension could occur without any medical underwriting or experience rating beyond what was determined at the initial set up of the policy.

The rule requires insurers to clearly notify their customers that the coverage they are planning to purchase is not required to comply with the Obamacare requirements for health insurance.  Consumers will be informed of what limitations exist, such as no maternity care, mental health care, or a lifetime cap on health benefits.

Also, because the STLD plans are now deferred back to state regulatory authority, some states may decide to have more restrictions on the plans than what the federal government requires, even going as far to not allow them.  Insurers are required to notify their consumers of any additional information about their policies that is required by state law.

The Centers for Medicare and Medicaid services estimates that in 2019, enrollment in STLD insurance plans will increase by 600,000, of which 200,000 will be people who were in an Obamacare exchange, 300,000 were from an off-exchange plan, and 100,000 that did not have insurance.

The final rule will become effective 60 days after it is published in the Federal Register.