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Trump administration pitches short-term health insurance plans that skirt Affordable Care Act regulations

Proposed rule lengthens from 3 months to a year in the time allowed for consumers to have short-term, limited-duration health insurance.

Susan Morse, Senior Editor

The Trump administration on Tuesday proposed a new rule for short-term, limited duration health insurance that would allow payers to design skinny benefit plans that consumers could purchase for up to a year of coverage.

Short-term, limited-duration insurance is not required to comply with federal requirements for individual health insurance coverage.

The proposed rule, which came out of President Trump's October 2016 executive order, is seen as a way to lower premiums by skirting Affordable Care Act coverage requirements.

Consumers would be able to buy plans for any period of less than 12 months, instead of the three months currently allowed, according to the announcement this morning from Health and Human Services Secretary Alex Azar and Centers for Medicare and Medicaid Services Administrator Seema Verma. Premiums for healthy consumers would be expected to cost less than what they could purchase through the ACA marketplace where no one can be denied coverage based on their medical condition.

America's Health Insurance Plans expressed concern Tuesday that consumers with preexisting or chronic conditions could face higher premiums.

"While we are reviewing the proposed rule to understand its impact on the people we serve, we remain concerned that expanded use of short-term policies could further fragment the individual market, which would lead to higher premiums for many consumers, particularly those with pre-existing conditions," said AHIP spokeswoman Kristine Grow.

The issue is expected to be discussed during AHIP's upcoming National Conference on the Individual and Small-Group Markets, being held March 8 and 9 in Washington, D.C.

Short-term plans 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, HHS said. But it is also for those who find ACA coverage too expensive, have fewer plans to choose from in the exchange market, or who see doctors that are not in network under ACA plans.

Premiums have more than doubled between 2013 and 2017 for health plans offered on the exchange, HHS said. In the fourth quarter of 2016, a short-term, limited-duration policy cost approximately $124 a month compared to $393 for an unsubsidized ACA-compliant plan, according to HHS.

  Based on enrollment trends, the Department projects that approximately 100,000 to 200,000 additional individuals would shift from an ACA-compliant individual market plan to short-term, limited-duration insurance in 2019. Only about 10 percent of these individuals would have been subsidy-eligible if they maintained their exchange coverage.

  Consumers currently can buy short-term insurance for up to three months. The proposed rule extends the maximum period to 12 months, reverting to a previous definition of short-term, limited-duration insurance.

A final rule, published in 2016, restricted short-term, limited-duration insurance to less than three months. Key stakeholders, including state regulators, expressed concern that the current limit could cause harm to some consumers or limit options, and have little positive impact on the risk pools in the long run, HHS said.

Longer limited-duration plans also reduce the risk of a gap in coverage for people with short-term coverage who become seriously ill while covered. Under current rules, a person who becomes ill would likely not qualify for another plan less than three months in duration because of the illness and would then need to wait without coverage until the next year to gain coverage in the individual market.

Today's rule was published by the Department of the Treasury's Internal Revenue Service, Department of Labor and HHS. It is in direct response to President Donald Trump's October 2017 Executive Order "Promoting Healthcare Choice and Competition Across the United States," which directs the departments to consider proposing regulations or revising guidance to expand the availability of short-term, limited-duration insurance and allow it to cover longer periods.

CMS will accept comments on the proposed rule for 60 days.

  "Americans need more choices in health insurance so they can find coverage that meets their needs," Azar said by statement. "The status quo is failing too many Americans who face skyrocketing costs and fewer and fewer choices. The Trump Administration is taking action so individuals and families have access to quality, affordable healthcare that works for them."

Verma said, "In a market that is experiencing double-digit rate increases, allowing short-term, limited-duration insurance to cover longer periods gives Americans options and could be the difference between someone getting coverage or going without coverage at all."

Twitter: @SusanJMorse
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