Trump Administration Finalizes Rule for Short-Term, Limited Duration Health Plans

This story has been updated.

The Trump administration Wednesday released a final rule regarding short-term, limited-duration health plans, expanding their duration to 12 months, with renewals that last up to 3 years.

The previous maximum for the plans was 3 months. The administration is pitching these plans, as well as association health plans, as less expensive alternatives to individual health insurance purchased through the exchanges created by the Affordable Care Act (ACA).

“Under the Affordable Care Act, Americans have seen insurance premiums rise and choices dwindle,” HHS Secretary Alex Azar said in a statement. “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.”

Critics of the plans, however, note that the plans are allowed to charge more for patients with preexisting conditions and are not compliant with the essential health benefits mandated by the ACA, such as prescription drug coverage, or excluding coverage for certain conditions, such as cancer care.

In a statement, the Blue Cross Blue Shield Association (BCBSA) warned about future harm to consumers.

“Health insurance should be available and affordable for everyone, regardless of their health status,” said Justine Handelman, BCBSA senior vice president, Office of Policy and Representation. “The broader availability and longer duration of slimmed-down policies that do not provide comprehensive coverage has the potential to harm consumers, both by making comprehensive coverage more expensive and by leaving some consumers unaware of the risks of these policies.”

“The focus should now be on providing robust protections for consumers, with full disclosure of what’s covered and what is not. Steps also should be taken to prevent cherry-picking that separates the healthiest of customers from those with significant medical needs, raising the cost of comprehensive coverage for all who want the greater security it provides.”

The new rule allows an initial period of less than 12 months; with extensions, the plans can be renewed for a maximum duration of no longer than 36 months.

Making the plans renewable is a legal safeguard in case the new rule is challenged in court, The Associated Press reported. The rule includes a “severability clause” that says if the 36-month provision is invalidated, the rest of the regulation would still stand. That would allow insurers to keep marketing the plans, instead of throwing the entire regulation into doubt.

In its release announcing the change, CMS pointed to data that showed people enrolled in the individual market without subsidies fell by 20% nationally last year, as premiums rose by 21%.

CMS said the average monthly premium for an individual in the fourth quarter of 2016 for a short-term, limited-duration policy was approximately $124, compared with $393 for an unsubsidized individual market plan.

A recent policy brief from America’s Health Insurance Plans (AHIP), however, noted that premiums have been rising because of a number of factors related to market instability. The elimination of the individual mandate penalty, taking effect next year, is one of them.

In addition, as currently healthy people self-select into less expensive alternative plans, the ACA plans will be left with a sicker pool of enrollees, who will be more expensive to cover overall.

A Kaiser Family Foundation study earlier this year noted that the plans are less expensive because of what they do not cover: 71% do not cover outpatient prescription drugs and 62% do not cover mental health or substance use treatment. They also come with dollar caps and higher deductibles, and people who buy the plans put themselves at risk for large, uncovered medical bills.

During the next open enrollment period for the ACA, the administration will promote the plans alongside marketplace plans.

The Center on Health Insurance Reforms at the Georgetown University Health Policy Institute has warned that the short-term plans will lead to a problem of underinsurance, which the ACA was designed to alleviate.

“Consumers should clearly understand what their plan does and does not cover. The new requirement for short term plans to make clearer disclosures to consumers is an important improvement. We also appreciate that the rule affirms the role of states to regulate these plans, including the option to reduce the duration period for short-term coverage," said AHIP's chief executive officer, Matt Eyles, in a statement.