(Story updated at 3:48 p.m. ET)
HHS plans to limit the use of short-term health plans and tweak the Affordable Care Act's risk-adjustment program for health plans to account for people who need coverage for only part of the year. The program will also now track prescription drug usage as a factor in assessing risk.
The changes, laid out in proposed regulations issued Wednesday, are aimed at moving more healthy people into the exchanges by limiting cheaper but less robust coverage options.
Short-term health plans are designed to fill only very short coverage gaps and do not meet standards set by the ACA. Premiums can be based on the patient's health condition, can discriminate against patients with pre-existing conditions and often don't offer prescription benefits.
HealthMarkets, a private insurance agency, reported that short-term sales in 2015 were about 150% higher than in 2013. Insurers have started selling short-term plans as primary health coverage by allowing consumers to continually renew their plans.
Under HHS' new proposed rules, short-term policies may be offered for only less than three months and coverage cannot be renewed at the end of the three-month period.
“This is a loophole, and it's a loophole about a design that's important,” HHS Secretary Sylvia Mathews Burwell said. “That limited coverage should be limited. It is for someone making a transition and knowing they're making a transition and only for three months.”
Insurers must also notify consumers that the coverage does not satisfy ACA requirements and that consumers will still owe a tax penalty for not fulfilling the mandate.
“By keeping these consumers out of the ACA single-risk pool, such abuses of limited duration coverage increase costs for everyone else, and they could have a greater impact over time if allowed to become more widespread,” HHS said in a statement.
Insurance industry stakeholders had a mixed reaction to the agency's attempts to limit use of short-term plans. Some argue that the plans fill a need.
“Reducing consumer choice options by limiting short term policies should be carefully weighed, as not all consumers have the same health care needs,” said Audrey Brown, CEO of the Florida Association of Health Plans.
Others felt that the proposal will succeed in protecting consumers while balancing the risk pool.
“We want people in ACA-compliant plans. Short-term plans provide inadequate benefits,” said Ceci Connolly, CEO of the Alliance of Community Health Plans, which represents 22 not-for-profit insurers with their own provider networks. “You want healthy people in the risk pool.”
Betsy Imholz, special project director at the Consumers Union, a division of Consumer Reports said the suggested disclosures are really important as they'll help consumers avoid tax penalties.
Limiting use of short-term plans could be key to attracting more young people, policy insiders say. Despite continuous outreach efforts, young adults account for just a quarter of the entire exchange population since the exchanges opened in 2013.
This proposal is a solid first step in possibly increasing enrollment of this group, according to Larry Levitt, senior vice president for special initiatives at the nonprofit Kaiser Family Foundation.
“Having a short term plan has been especially advantageous for healthy young people because even when paying the penalty, the premiums on these plans may be cheaper than an ACA-compliant plan,” Levitt said.
Beginning in 2017, the risk-adjustment model will account for people who enroll for only a portion of the year because of major life changes. In 2018, prescription drug data will be used to account for the costs of covering enrollees.
HHS also hinted that more changes are to come.
The agency is also cracking down on the use of special enrollment periods. Starting June 17, consumers will be asked to provide significant documentation to prove eligibility to gain coverage outside of open enrollment. For example, if they claim they have had a child, they will need to provide birth certificates.
“We are supportive of the steps to ensure that those seeking coverage due to a special qualifying event are truly eligible and are not just trying to game the system,” said Mary Beth Chambers, a spokeswoman of Blue Cross and Blue Shield of Kansas.
