Fourteen senators sent a letter to Secretary of Health and Human Services Tom Price on Thursday asking him to reverse an Obama-era regulation limiting the use of short-term, limited-duration insurance plans. Because these plans provide coverage for less than 12 months, they’re not subject to many of the Affordable Care Act’s most controversial insurance regulations: They don’t have to cover the 10 essential health benefits, they’re permitted to deny coverage to those with pre-existing coverages, and they generally carry maximum coverage limits. (They also, however, don’t count as “insurance” for the purposes of the ACA’s individual mandate.) In large part due to the plan’s exemptions from those regulations, they’re much cheaper than traditional health insurance.
Historically, people have mostly used the plans to cover temporary gaps in insurance coverage, but in the wake of the ACA, sales of the plans soared thanks to their low price tags. And insurers slowly started to sell longer-duration plans, all the way up to 364-day plans. In response, the Obama administration proposed last year a rule that would limit the duration of those policies to three months, bar consumers from renewing the policies, and require insurance companies to inform consumers that the plans don’t meet the requirements of the ACA’s individual mandate.
The Obama administration argued that the regulation was necessary not only to protect consumers, but also to protect the stability of the non-group risk pool. By siphoning off primarily young, healthy consumers, short-term plans worsen the quality of the traditional insurance risk pool, driving up premiums for anyone wishing to purchase traditional health insurance. The (slightly revised) rule, which allowed consumers to request renewals of the plans (but didn’t require insurers to grant those renewals), was finalized last fall and formally went into effect on April 1st, 2017.
It’s anyone guess, however, how long the rule lasts now that Donald Trump is president. Conservatives abhor these types of regulations and argue that individuals, not the federal government, are best-suited to decide what kind of insurance coverage is right for them. Price, meanwhile, has vowed to use regulatory authority to reduce the “burdens” of the ACA and give consumers more freedom to choose plans that work for them, as has Trump, a fact the senators’ letter alludes to:
This significant restriction of STLD [short-term, limited-duration] plans is yet another example of the Obama Administration’s policies that inhibited consumer choice and harmed the market for health care products. On January 20, 2017, President Trump issued an Executive Order calling on the head of each department to “encourage the development of a free and open market in interstate commerce for the offering of health-care services and health insurance, with the goal of achieving and preserving maximum options for patients and consumers.” This regulation is inconsistent with the President’s vision of greater choices for consumers and lower costs.
The regulation, in other words, is anathema to the conservative vision for insurance markets in America in which people can buy a wide variety of insurance plans—including plans with coverage limits that don’t cover things like prescription drugs, maternity care, or mental-health benefits—across state lines. And it may serve as an easy target for Price’s regulatory authority because it reads as a pretty small, reasonable change; many people genuinely do use these plans for just a few months while they’re in between jobs, for example, and at least some of those people need more than three months of coverage.
But the regulation also serves as an illustration of how complicated and interconnected the insurance market really is. Regulation of these plans may seem unrelated to the ACA’s larger non-group market issues, but continued growth of these plans could further destabilize the ACA’s non-group markets.
