Republican-led states are pushing back on a federal proposal to limit the use of short-term health plans. The Obama administration aims to move more healthy people into the Affordable Care Act marketplace 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.
Under a proposal co-drafted by the IRS, HHS and Department of Labor, 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. As things are now, consumers can stay in such plans for 12 months.
Insurers must also tell consumers that the coverage does not satisfy ACA requirements and is therefore subject to a tax penalty for not fulfilling the mandate.
“This is a loophole, and it's a loophole about a design that's important,” HHS Secretary Sylvia Mathews Burwell said upon the rule's release in June. “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.”
The agencies have received over 100 comments, with states and insurance industry stakeholders voicing concern while health plans and patient advocates express support.
Plans noted the proposal will help strengthen the ACA single risk pool for issuers committed to providing meaningful coverage according to Ceci Connolly, CEO of the Alliance of Community Health Plans, which represents 22 not-for-profit insurers with their own provider networks.
“This apparent arbitrary limit of policy duration could harm some consumers especially those in employment transition,” Michael Rhoads, deputy commissioner at the Oklahoma Department of Insurance said in a comment letter. “More often than not transition periods are longer than three months.” Nebraska's insurance commissioner voiced similar concerns.
For example, if an individual misses the open enrollment period and is not eligible for a special enrollment period, a three-month policy may not be sufficient to meet coverage needs, Rhoads argued.
The 3 million low-income people living in states that haven't expanded Medicaid are also vulnerable, according to an analysis performed by HealthPocket, a website that compares and tracks health insurance coverage data.
In these states, low-income residents can have incomes that are too high for Medicaid coverage but too low to get subsidies for marketplace coverage. That makes affordable options limited. Another group that could be harmed is the 11 million undocumented people living in the U.S. who are unable to obtain other coverage options, according to HealthPocket.
Pennsylvania's insurance commissioner Teresa Miller was an outlier among state opinions. She said her agency shares the concern that short term plans could discourage consumers from enrolling in comprehensive coverage which negatively impacts the risk pool for ACA-compliant comprehensive coverage.
Advocates agreed the plans could negatively affect patients.
“Individuals could find themselves enrolled in policies that fail to provide coverage of medically necessary services,” said Kirsten Sloan, senior policy director at the American Cancer Society Cancer Action Network.
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.