Rules Allow Short-term Plans to Last up to Three Years

November 6, 2023

THE TRUMP administration has taken another step in its effort to roll out short-term health insurance plans by extending the amount of time such plans can be in effect. Under the new rule, which was issued August 1, short-term plans can be purchased for up to 12 months and policyholders can renew coverage for a maximum of 36 months. These controversial plans, though, do not have to square with the Affordable Care Act, like not covering 10 essential benefits and not having to cover pre-existing conditions – and they can even exclude coverage for medications.

As a result of the changes, the Centers for Medicare and Medicaid Services predicts that an additional 600,000 people will enroll in short-term plans in 2019, jumping to 1.6 million individuals by 2021. Part of that will include some 200,000 people who drop their plans in the individual market and sign up for short-term coverage. That’s compared with about 122,500 people enrolled in short-term plans in 2017, according to the National Association of Insurance Commissioners. But enrollment is expected to surge now that the individual mandate penalty has been eliminated. That said, CMS predicts that premiums for 2019 ACA exchange plans will rise 1%, while net premiums will decrease 6%. The final rule goes into effect 60 days after it is posted, but state regulators would still need to approve any new plans that come to market. Health insurers may start selling short-term plans that last up to a year in a few months. The new regulation, however, does not require insurers to renew the policies.

Health insurers and consumer advocates have assailed the plans, saying they provide limited coverage. However, the plans provide a much lower cost option for anyone young or older – that does not want to pay for the government mandated 10 essential benefits they do not need or choose not to have. For example, someone who does not take any medications may not want drug benefits. Also, they may want to have a higher deductible to save on premium.

New rules change the game The renewability portion of the new regulations was modeled on COBRA plans, which allow people who leave a job to continue on the same plans they had while on the job, but they have to foot the bill themselves. Plans will be able to exclude someone based on pre-existing conditions. The plans also do not have to cover the ACA’s 10 essential health benefit categories, such as maternity care or prescription drugs, for example. Insurers that sell these plans will be required to:

• Prominently display wording in the contract that the plans are exempt from some ACA provisions.
• List coverage exclusions and limitations for pre-existing conditions.
• List what health benefits are covered.
• Explain if the plans have lifetime or annual dollar limits on health benefits. States will be able to regulate these plans as they see fit. For example, some states limit the time someone can be enrolled in a short-term plan, and they may bar renewals.