This is Big: HHS puts screws on short-term policies

Hat Tip To: 
Bob Herman

I receive most of the HHS/CMS press releases, but this one seems to have slipped by me (furiously checking spam filter...). Fortunately, Bob Herman of Modern Healthcare spilled the beans via Twitter this morning (emphasis mine):

Today, the Department of Labor, Department of Treasury, and Department of Health and Human Services (HHS) issued a proposed rule to revise the definition of short-term, limited duration coverage. Under the new rules, short-term policies may be offered only for less than three months, and coverage cannot be renewed at the end of the three month period. The proposed rule also improves transparency for consumers by requiring issuers to provide notice to consumers that the coverage is not minimum essential coverage, does not satisfy the health coverage requirement of the ACA, and will not prevent the consumer from owing a tax penalty. The proposed changes will help strengthen the risk pool by ensuring that short term limited duration plans are used only as intended, to fill truly temporary gaps in coverage.

First, let's hear it for the Oxford Comma, everyone!!

Seriously, though, this is important. I was surprised to learn that carriers aren't already required to let enrollees know that short-term policies don't qualify as ACA-compliant coverage; I kind of assumed that was already baked in, but apparently not. 

As for the "no renewal" rule, I'm guessing, as Herman notes, that that rule is gonna cause temper tantrums among certain insurance carriers.

It makes sense to me. The whole point of the ACA's individual mandate is to try and ensure that people are enrolled year round with fully compliant coverage. Whether you agree with that goal or not, letting people keep renewing what is presumably substandard, short-term policies over and over again kind of defeats the point.

UPDATE: OK, I just received the press release/link myself...and it actually includes a whole bunch of other announcements as well, although some of these have already been mentioned here or by HHS/CMS in the past:

Today, HHS is announcing a series of actions to strengthen the Marketplace risk pool. These actions include:

  • Curbing abuses of short-term plans that exploit gaps in current rules to use medical underwriting to keep some of the healthiest consumers out of the Affordable Care Act's single risk pool.
  • Improving the risk adjustment program to more accurately reflect the cost of partial-year enrollees and to incorporate prescription drug utilization data that provide a more complete picture of enrollees’ health status. These improvements will ensure that the program continues to work as intended to compensate issuers with higher-risk enrollees and thereby help issuers sustainably serve all types of consumers.
  • Helping consumers who turn 65 make the transition to Medicare, so that older consumers are served by the program designed for them and their health needs.
  • Beginning full implementation of the Special Enrollment Confirmation Process, which ensures that eligible individuals continue to have access to coverage through Special Enrollment Periods (SEPs), but prevents people from misusing the system to enroll in coverage only if they get sick.
  • Continuing our efforts to reduce data-matching issues (DMIs). CMS outreach, education, and operational improvements have contributed to a sharp reduction in total data matching issues generated and an almost 40 percent year-over-year increase in documents submitted to help resolve income and citizenship and immigration data matching issues. Improving the resolution of DMIs benefits the risk pool because it keeps eligible consumers, often younger and healthier consumers less motivated to overcome obstacles such as extra paperwork, from losing coverage mid-year.

The first bullet is obviously what I just referred to above.

The Risk Adjustment program is one of the "Three R's", which also includes the sabotaged Risk Corridor program and the Reinsurance program. I don't know much about it, but I do know that there have been a lot of complaints by smaller carriers that the RA program is somehow accomplishing the opposite of what it was intended to do, so it makes sense that they're making adjustments to it.

The 65/Medicare transition provision makes total sense.

I've written a lot about the SEP verification issue, and CMS announced that they'd start requiring SEP eligibility documentation back in February; it sounds like it took a few months to actually put the new process into place.

Finally, the Data Matching Issue is something that I wrote a lot about last winter. I noticed several weeks into the 2016 Open Enrollment Period that CMS had quietly started "pre-purging" cancelled/ineligible QHP enrollments from HealthCare.Gov during OE3, instead of waiting until after the period ended to strip them out. Glad to see they're continuing to improve the process.

UDPATE x2: Here's the Wall St. Journal article which was actually linked to from within the HHS press release itself, providing some context for the Short Term policy decision:

Sales of short-term health insurance are up sharply since the health law’s major provisions took effect in 2014, according to insurance agencies. New sales figures show the temporary policies, traditionally sold to consumers who are trying to fill coverage gaps for a few months, have continued their surge recently—even though people who buy them face mounting financial penalties because the coverage doesn’t meet the ACA’s standards.

Robin Herman, the 34-year-old owner of a marketing firm in San Francisco, bought a short-term policy in December. The monthly cost of her short-term coverage, plus conventional ACA-compliant plans for her two children, is roughly one-quarter of what she would have paid for conventional health plans covering all three of them, she says.

...Ms. Herman’s new policy, like many short-term plans, doesn’t cover pre-existing conditions, a limitation no longer allowed in full health coverage. Ms. Herman’s plan also caps total benefits at $1 million, another feature prohibited in ACA plans. It doesn’t cover most prescription drugs. To get the plan, Ms. Herman had to qualify as healthy by answering a questionnaire. ACA plans are sold to every consumer regardless of health status.

“This is exactly the kind of coverage the ACA was designed to get rid of,” said Larry Levitt, a senior vice president at the Kaiser Family Foundation. Consumer advocates say they fear buyers don’t understand the short-term policies’ limits, or the risk of penalties that can hit $695 or more for adults in 2016. Some lower-income consumers also may not realize they qualify for federal subsidies that can sharply reduce the cost of ACA plans.

A spokesman for the Department of Health and Human Services said that under federal law, short-term plans aren’t considered individual health insurance, and thus aren’t subject to the ACA’s rules. Some short-term plans can last nearly a year, after which a policyholder must reapply.

This last point seems to be the key change being announced today; instead of defining "short term" as being up to 11 months (which allows someone to either skip 1 month per year or enroll in an ACA-compliant policy for 1 month and then switch to a short-term plan for the rest of the year), "STPs" can no only run up to 3 months per year.

The wording of the press release is a little unclear about how the "no renewals" provision would work--I'm not sure if this means that carriers can only provide a STP to the same person for 3 months of the year, or if the enrollee is allowed to switch from one STP to another every 3 months, or what.

As for why they're doing this, in addition to the reasons noted above, there's also the (hoped for) positive impact this change will hopefully have on the ACA-compliant risk pool...since cutting people off of STPs should push a lot of them onto ACA-compliant plans. Since these are presumably a healthy lot, that should help with the risk pool, although there's no guarantee, of course.

How many people are we talking about here? Well...

EHealth said the number of people applying for short-term policies on its site last year was nearly 147,000, slightly down from 2014 but more than double the figure for 2013, before the ACA took full effect.

HealthMarkets Inc., a national insurance agency, said short-term sales in 2015 were about 150% higher than in 2013. GoHealth LLC, a major health-insurance site, saw a “substantial increase” in short-term policy sales in 2014, and again in 2015, said Michael Mahoney, a senior vice president.

That's pretty vague, but it sounds like there are perhaps a million or so people using STPs nationally?

That holds a risk for the ACA’s insurance marketplaces. The short-term plans can siphon off healthy people who are needed to help make the ACA insurance business work. Those consumers then add to the costs of ACA plans if they buy coverage only when they have health needs. “You cause some real problems for the market,” said Timothy S. Jost, a professor at Washington and Lee University.