NAIC & other stakeholders play tug-of-war over President Biden's #ShortAssPlans rule

I last wrote about so-called "Short-Term, Limited Duration" healthcare policies back in July (aka STLDs, though "Short-Ass Plans" is my preference).

Once again, here's a refresher on what STLDs are via KFF:

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. 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. individual who buys a short-term policy and then becomes seriously ill will not be able to renew coverage when the policy ends.

...short-term policies:

  • 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.

In any event, back in July, the Biden Administration finally officially rolled out their own STLD restriction policy:

 First, it reverses the Trump -era rule finalized in 2018 that allowed the plans to run for up to a year and be renewed for up to three years, and instead limits the plans’ duration to three months and allows a one-month extension.

...The proposed rule also addresses “fixed indemnity” plans that provide consumers with pre-set payments to help cover certain expenses or replace income. To be exempt from health insurance regulations, those plans must live up to their purpose and cannot mimic comprehensive insurance. Finally, short-term plans must provide all consumers -- including existing enrollees -- with a clear disclaimer that explains the limits of their coverage.

The rule would not bar the sale of short-term plans during open enrollment, as some stakeholders have called for, but officials point out that the departments are taking comments on additional protections, beyond the disclosures, that could be put in place to ensure that consumers understand what products they’re buying, particularly during time periods like open enrollment when there’s competition between ACA-compliant products and other plans.

Returning to the 3-month-only rule is pretty much what I was expecting; the one-month extension is actually more lenient than the Obama-era policy, I think (I could be wrong about that). Adding the indemnity crackdown and the disclaimer requirement are nice touches as well.

However, yesterday Amy Lotven of Inside Health Policy reported that Biden's rule is being criticized from both sides...some stakeholders want it to be made more restrictive...

A group of more than 20 Democratic senators have joined numerous insurer and provider lobbies, patient groups and consumers representatives to urge the Biden administration to finalize its draft plans to reverse Trump administration rules and limit on the duration of short-term insurance plans that do not have to comply with Affordable Care Act (ACA) protections. The stakeholders and senators say the administration should go further than the draft, including by barring the sale of plans during open enrollment, strictly limiting the duration of coverage to three months and further limiting insurers and brokers’ ability to “stack” policies to extend their duration.

...Stakeholders who view STLDI as “junk” insurance had been anxiously awaiting release of the draft rule, including the Association of Community Affiliated Plans (ACAP), which had led a lawsuit over the Trump administration’s rule; advocates at the Leukemia and Lymphoma Society and other patient organizations; consumer representatives like Families USA; hospital and provider groups; and some state regulators. Those groups generally cheered the proposals.

On the other hand, the National Association of Insurance Commissioners (NAIC) wants Biden to loosen up on the STLD rules:

The lobby representing state insurance commissioners is bristling at the Biden administration’s proposal to limit the duration of the short-term plans to three months, saying such decisions should be left to state regulators that have authority over, and are more familiar with, local markets. If the departments will not scrap the draft rule, the final version should be tweaked to preserve state choice, the National Association of Insurance Commissioners (NAIC) tells HHS, and the Treasury and Labor Departments.

Several other state regulators and stakeholders similarly argue the proposed changes overstep federal authority and urge the administration to scrap the rule or consider alternative approaches.

...NAIC says it appreciates the federal governments’ concerns about potential consumer confusion between comprehensive coverage and plans that may not offer the same level of benefits and adds that some consumers may not be able to purchase comprehensive coverage plans due to underwriting. Still, NAIC says, consumers should have meaningful choices tailored to markets in their state, and banning certain features at the federal level could drive customers to find coverage in unregulated markets.

As I note above, I actually think the Biden Administration has it right given the current situation (that is, as long as the ARP/IRA subsidies are still scheduled to expire at the end of 2025). If and when those enhanced ACA subsidies are made permanent, that's when I would be onboard with cracking down on STLDs further.