At Last! CMS to finally issue formal rule on #ShortAssPlans this April
It's been over a year and a half since I've paid much attention to #ShortAssPlans...officially "Short-Term, Limited Duration" healthcare policies.
Short-term, limited duration (STLD) health insurance has long been offered to individuals through the non-group market and through associations. The product was designed for people who experience a temporary gap in health coverage.1 Unlike other products that are considered “limited benefit” or “excepted benefit” policies – such as cancer-only policies or hospital indemnity policies that pay a fixed dollar benefit per inpatient stay – short-term policies are generally considered to be “major medical” coverage; however, short-term policies are distinguished from other comprehensive major medical policies because they only provide coverage for a limited term, typically less than 365 days. Short-term policies are also characterized by other significant limitations, including the types of services covered, often with a dollar maximum.
...an individual who buys a short-term policy and then becomes seriously ill will not be able to renew coverage when the policy ends.
- are often medically underwritten – applicants with health conditions can be turned down or charged higher premiums, without limit, based on health status, gender, age, and other factors;
- exclude coverage for pre-existing conditions – policyholders who get sick may be investigated by the insurer to determine whether the newly-diagnosed condition could be considered pre-existing and so excluded from coverage;
- do not have to cover essential health benefits – typical short-term policies do not cover maternity care, prescription drugs, mental health care, preventive care, and other essential benefits, and may limit coverage in other ways;
- can impose lifetime and annual limits – for example, many policies cap covered benefits at $2 million or less;
- are not subject to cost sharing limits – some short term policies, for example, may require cost sharing in excess of $20,000 per person per policy period, compared to the ACA-required annual cap on cost sharing of $7,350 in 2018;
- are not subject to other ACA market requirements – such as rate review or minimum medical loss ratios; for example, while ACA-compliant non-group policies are required to pay out at least 80% of premium revenue for claims and related expenses, the average loss ratio for individual market short-term medical policies in 2016 was 67%; while for the top two insurers, who together sold 80% of all short-term policies in this market, the average loss ratio was 50%.
In other words, #ShortAssPlans are basically like pre-ACA individual market policies...they don't include guaranteed issue, community rating, essential health benefits or most of the other "Blue Leg" requirements of ACA policies.
As the name suggests, the whole point of these policies is that they're supposed to be both "short-term" (ie, you only use them for a few months as a stopgap between more comprehensive, reliable coverage) and for a "limited duration" (that is, you're not supposed to daisychain them together to cover you for the full year).
The Obama administration used regulatory authority to restrict #ShortAssPlans to no more than ~90 days per year (making them "short term") and prohibited carriers from offering these 3-month stints back-to-back (thus making them "of limited duration"). In other words, the Obama Admin required STLDs to be both ST and LD.
As I explained in a now-somewhat outdated video a few years back, however, the Trump Administration rescinded this policy, allowing STLDs to last up to 365 days at a time (ie, a full year)...and letting them be renewed after that, thus making the "STLD" branding utterly meaningless. In addition, the Trump Admin put a mountain of effort into encouraging people to enroll in these policies, which go against the entire point of the ACA's patient protection provisions.
As for myself, while I'm not a fan of STLDs on principle (thus the #ShortAssPlans moniker), as I noted back in May 2021 when Biden HHS Secretary Xavier Becerra was asked about the issue:
...“And,” [Becerra] added, “there is under the Affordable Care Act a place for some short-term plans, but it is truly short-term plans for those who need short-term care who are in between jobs for example or who are going overseas for a little while and can't--don't have the luxury to have a plan that is long-term because you only need it short-term.
This is about where I'm at right now. Regular readers know I'm not a fan of Short-Term, Limited Duration (STLD) plans at all, but I do see a very limited purpose for them. The whole reason they're called "Short Term, Limited Duration" is specifically because they're intended to be just that: For the short term only, and for limited durations only. They were never intended to be a replacement for major medical policies.
Going back to the Obama-era rules, which restrict STLDs to last no more than 3 months, once per year, seems reasonable for the time being...and if the expanded subsidies of the American Rescue Plan are made permanent and Senator Sheehan's S.499 bill (which would upgrade the benchmark plan from Silver to Gold and significantly improve CSR assistance) becomes law, I'll fully support eliminating STLDs altogether (which some states have already done).
In other words, I was grudgingly willing to accept #ShortAssPlans as a necessary evil under the original ACA subsidy structure, as long as they're tightly restricted...but if & when the upgraded ACA subsidies under the American Rescue Plan (and now the Inflation Reduction Act) are locked in permanently, I'd be perfectly fine banishing STLDs to the aether (or at least restricting their availability even more stringently yet).
At the moment, things are sort of in between these states: The ARP/IRA subsidies are generous enough to make STLDs mostly unnecessary...but they aren't permanent yet, as they're currently scheduled to sunset at the end of 2025.
With all of this in mind, here's some breaking news on the status of STLDs under the Biden Administration, via Amy Lotven of Inside Health Policy:
CMS is now targeting an April release for a proposed rule on the sale of short-term limited duration (STLD) health plans, according to HHS’ newly released regulatory agenda, a move that stakeholders who support restrictions on the less-generous plans say is long overdue.
The administration revealed the target date in the latest Unified Agenda (Fall 2022) published by the White House Office of Management and Budget (OMB) on Tuesday (Jan. 4).
...Shortly after the inauguration, the White House issued an executive order mandating review of all Trump-era rules, guidance or other moves that could undermine access to or affordability of health care. The executive order also rescinded a Trump administration order that had laid the foundation for the expansion of short-term plans.
Stakeholders initially expected the rule to come out in 2021...But the rule never appeared, and the Spring 2022 regulatory agenda again showed the proposed regulation would be out in August of that year.
According to the new agenda out Jan. 4, the administration now aims to release in April a proposed rule on short-tern plans that would “ensure this type of coverage does not undermine the Affordable Care Act, including its protections for people with pre-existing conditions, the Health Insurance Exchanges, or the individual, small group, or large group markets for health insurance in the United States."
While it’s unclear what exactly will be in the rule, a consumer advocate hopes that it will limit plans to three months with no renewals, restrict sales during open enrollment, regulate marketing and bar rescissions.
...all of which seems reasonable to me. Again, if & when the ARP/IRA's enhanced subsidies are locked in permanently (preferably with an upgrade to CSR subsidies or, more realistically, a nationally mandated maximized Premium Alignment policy, I'd be fully onboard with simply scrapping #ShortAssPlans altogether.