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Trump Administration extends short-term plans to three years in final rule

Some stakeholders say short-term plans will destabilize ACA market, but these plans are not expected to divert consumers already enrolled, HHS says.

Susan Morse, Managing Editor

The Trump Administration has finalized the rule for short-term, limited duration plans to extend their availability from three months to one year and in a major change from the proposed rule, is allowing individuals to renew these plans for a maximum of up to three years.

This is a big change from the proposed rule released in April. Annual renewal of coverage of up to 36 months can happen without reapplying or underwriting, HHS officials said. However, this does not guarantee renewal of coverage from insurers.

Currently, short-term plans cover a maximum period of three months, without the ability to renew.

The plans will be attractive to those priced out of the Affordable Care Act market who have been poorly served under the ACA, such as middle class consumers who have no access to employer insurance, HHS officials said.

The plans would offer lower premiums because they are not mandated to follow the coverage of a qualifying health plan, but HHS officials said they would not divert many from the ACA market.

Seventy-percent of people are purchasing an ACA plan use of a premium tax credit subsidy, according to James Parker, senior advisor to the Secretary for Health Reform and director for the Office of Health Reform.

"We don't expect significant migration away from the exchange," Parker said.

HHS believes there will be significant interest in the short-term policies from individuals who are not already in exchange plans because they've been priced out of coverage, he said.
Impact analysis over the next ten years shows that in 2019, the year the rule goes into effect, 600,000 additional people will enroll in these plans.

America's Health Insurance Plans said after the proposed rule was released that it was concerned the short-term plans would encourage healthy consumers in the ACA market to leave to purchase short-term plans.

AHIP asked the U.S. Department of Health and Human Services to shorten the duration of short-term limited duration insurance from one year to six months.

State regulators will have to approve the plans and states have the authority to regulate and limit the use of short-term plans.

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.

HHS said Centers for Medicare and Medicaid Services data show stable enrollment for subsidized exchange coverage, but the number of people enrolled in the individual market without subsidies declined by 20 percent nationally in 2017, while at the same time premiums rose by 21 percent.

Many state markets experienced far more dramatic declines, HHS said, with unsubsidized enrollment dropping by more than 40 percent in six states, including a 73 percent decline in Arizona.

The rule is a direct response to President Trump's October 2017 Executive Order "Promoting Healthcare Choice and Competition Across the United States."
"Under the Affordable Care Act, Americans have seen insurance premiums rise and choices dwindle," said Health and Human Services Secretary Alex Azar. "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."

Short-term, limited-duration insurance plans are not required to comply with federal requirements for individual health insurance coverage and are designed to provide temporary coverage for individuals transitioning between healthcare policies, such as an individual in between jobs, or a student taking a semester off from school.

Key stakeholders, including state regulators, have expressed concerns that the current limit could cause harm to some consumers, limit consumer options, and have little positive impact on the risk pools in the long run.

The U.S. Department of Health and Human Services, and Departments of Labor and the Treasury issued the final rule Wednesday morning.

The final rule will go into effect 60 days after posting date on August 1.

Twitter: @SusanJMorse
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