HHS, along with DOL and the Department of Treasury, released a final rule on short-term, limited duration insurance. The final rule allows short-term plan policies to be offered for up to 12 months (technically 364 days), and allows consumers to renew those plans for up to three years. The new rules take effect 60 days from the August 1 release of the final rule, meaning they will be in effect by the start of the ACA open enrollment season on November 1. Previously, short-term plan policies were limited to less than three months and were not renewable.
Short-term plans are an insurance product that pre-date the ACA and were intended to serve as temporary coverage when a consumer experienced a gap in coverage (for example, when in between jobs). However, short-term plans do not have to comply with ACA market reforms, which means insurers offering these policies can medically underwrite them, exclude coverage for preexisting conditions, exclude coverage for entire essential health benefit categories, rescind coverage, impose annual and lifetime limits, and impose higher out-of-pocket cost sharing than is allowed for ACA-compliant plans. In addition, short-term plans are not subject to the ACA single risk pool requirement or risk adjustment program. Given this, short-term plans are relatively cheaper than ACA-compliant plans and tend to attract younger and healthier individuals.
The administration believes expanding the availability of short-term plans will provide more affordable coverage options for consumers. However, there are significant concerns that increased availability of short-term coverage will siphon off healthier consumers, segment insurance markets, and increase premiums for those enrolled in ACA-compliant plans. Also, individuals enrolled in short-term plans may be at risk for financial hardship if they get sick and find that their condition is not covered under their policy or face much higher out-of-pocket costs than if they were enrolled in a comprehensive ACA plan. Various health care stakeholders have raised these concerns, including insurers, consumer groups, disease organizations, and actuaries. AKF submitted a comment letter on the proposed rule that echoed these concerns, and we opposed the rule due to the adverse impact it would have on access to affordable, comprehensive coverage for individuals with chronic conditions and the instability it will cause in the ACA marketplaces.