The Trump administration on Wednesday moved to finalize a rule that would let consumers maintain a short-term health insurance plan that skirts federal rules for just under a year, a step officials say will provide more affordable insurance options to more Americans.
The rule, which will be prepared Wednesday for publication in the Federal Register, is part of the administration's effort to allow people to purchase health care plans that don't comply with all of the regulations set by the 2010 health care law , and are typically less expensive than plans sold in the individual market exchanges.
The new rule will take effect in 60 days, although administration officials told reporters Tuesday night that it would likely be a “slow ramp-up” to the plans being sold, likely sometime next year. The rule reverses an Obama-era change that shortened the length of time someone could maintain a short-term plan to just under three months.
The plans will “help increase choices for Americans faced with escalating premiums and dwindling options in the individual insurance market,” Jim Parker, senior adviser to the Health and Human Services secretary, told reporters on a Tuesday night press call previewing the rule.
“Until we have a more comprehensive replacement for the Affordable Care Act and Obamacare, we’re looking to do everything we can to take incremental steps that will make insurance coverage of any type more affordable to those who today cannot afford insurance coverage,” he added.
Under the final rule, consumers could purchase short-term plans that cover an initial period of just under 12 months. A consumer could renew that plan for up to 36 months, based on the contact with the insurance provider, meaning the contract would indicate whether a consumer would provide medical information and go through underwriting again when renewing a plan.
Randy Pate, the director of the Center for Consumer Information and Insurance Oversight and deputy administrator of the Centers for Medicare and Medicaid Services, said the administration strengthened language in the proposal that plan providers must disclose when explaining that the plans do not meet the requirements of the health care law. In that notice, insurers would need to note that the plans are not considered qualified health plans and that they may have lifetime or annual dollar limits on health benefits and may or may not be renewable.
“We want people to fully read and understand what they’re buying,” he said. “We fully recognize these products are not necessarily for everyone, but we do think they will provide an affordable option to many people who have been priced out of the market.”
Short-term limited-duration plans, which have historically been meant for people who are between jobs or other types of coverage, do not have to cover the health care law's 10 essential health benefits, which are required types of services such as maternity or mental health care. They are also allowed to charge more or deny coverage if a patient has a pre-existing condition. Additionally, the plans don’t have to comply with the health law’s standards requiring plans to spend at least 80 percent of premium dollars on medical costs instead of components like administrative costs and profits.
Proponents of the 2010 law have raised concerns that short-term plans could siphon off healthy people from exchange plans, worsening the risk pool and driving up premium costs. The plans are not considered to meet the minimum essential coverage requirements under the law, but because Republicans ended the penalty for not having coverage as part of a tax overhaul that takes effect next year, that may not be a deterrent for some consumers.
The administration projects that roughly 200,000 consumers currently purchasing plans on the exchanges would leave that market because of the rule and that a total of roughly 600,000 people are estimated to enroll in the plans next year. By 2021 or 2022, an estimated 1.6 million additional people are projected to enroll in short-term plans, Pate said.
Industry groups strongly opposed the proposal and warned that the move, in coordination with the decision to end the penalty for not having insurance coverage which takes effect next year, could destabilize the markets.
The administration defends the legality of the rule by comparing it to the Consolidated Omnibus Budget Reconciliation Act health insurance rules, or COBRA, which allow employees to maintain health insurance coverage after leaving a job, Pate said. The short-term plans will be limited in duration because they can only be renewed for up to 36 months, he said.
The administration first proposed the rule in February. The final rule comes a few weeks after the HHS and Labor departments finalized another rule meant to expand association health plans, which allow businesses to band together to buy insurance. Consumer advocates are concerned that the association plans also could undermine the individual market.
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