WASHINGTON -- The Trump administration took steps on Tuesday to increase availability of insurance plans that don't comply fully with the Affordable Care Act.
Currently these cheaper, less comprehensive plans are only available to consumers for periods of less than 3 months under the ACA, but a (HSS), Labor, and Treasury would make the legal duration up to, but not including, 12 months.
The proposed rule, in addition to reversing the Obama-era provisions, goes one step further in seeking comment on whether these "short-term limited-duration plans" should also be renewable. Critics say that making such plans widely available would bifurcate the market, making premiums unaffordable for older and sicker patients who need conventional full-coverage plans.
During a call with reporters on Tuesday morning, HHS Secretary Alex Azar, JD, said the rule was "one step in the direction of providing Americans with health insurance options that are both more affordable and more suited to individual and family circumstances."
At a press briefing later, he added that the plans might be especially attractive for people who are between jobs, or who aren't eligible for Obamacare subsidies and live in areas with few affordable options. The short-term plans might also attract people who can't access the providers they want because of the limited networks on their current plan.
The difference in premiums between these short-term plans and exchange plans would be significant, Azar noted.
"In the fourth quarter of 2016, a short-term, limited duration policy cost approximately $124 a month compared to $393 for an unsubsidized ACA-compliant plan," noted a from the Centers for Medicare & Medicaid Services (CMS).
In October, President Trump signed an executive order directing agencies to consider extending short-term limited duration insurance and urging the appropriate agencies to also consider expanding the use of health reimbursement arrangements (HRAs).
That rule also urged agencies to consider allowing small businesses and trade groups to form association health plans (AHPs) letting individuals such as those with a common profession or trade to be counted as a large group and to buy plans across state lines.
CMS Administrator Seema Verma repeated the Trump administration's view that the current system of healthcare is "failing."
Both she and Azar noted that the average premium for individual healthcare coverage options "more than doubled" between 2013 and 2017 in the 39 states that run on the federal insurance exchange.
The secretary and administrator also stressed that of the 6.7 million people who paid the ACA's individual mandate penalty in 2015, 79% earned less than $50,000 a year.
Nuts and Bolts
Under the proposed rule, Verma noted, plans would not be subject to certain ACA provisions, including guaranteed issue, community rating, and the essential health benefits -- the minimum floor of coverage required for plans to be considered ACA-compliant.
"While some are critical of this fact, this also provides a much more affordable option for people in need. For them a short-term limited duration policy can mean the difference between having coverage for themselves and their families or going without coverage at all," Verma said.
Plans would still be subject to the individual mandate in 2018, she noted. (Repeal of the mandate does not take effect until 2019.)
Azar stressed, however, that the proposed rule includes consumer protections to ensure that people understand that these plans are not ACA-compliant.
And while plans would not be required to meet ACA rules, they would be subject to the Health Insurance Portability and Accountability Act of 1996 (HIPAA) and to state regulations.
In some states, the regulatory requirements might be high enough "that it essentially replicates" what is in place under the ACA, he told reporters at the briefing.
Projected Impact
Independent actuaries have calculated that between 100,000 and 200,000 individuals would shift from the individual market into short-term limited duration plans, if the rule is enacted, Verma said on the Tuesday morning phone call.
However, neither she nor Azar would say how many of the 28 million people who are currently uninsured would be expected to enroll in such plans.
Asked specifically about a different but related matter, whether he would intervene in Idaho where one insurer has filed plans that openly defy the ACA and some say break the law, Azar said he was not in a position to rule on the issue.
"Let's see where the state of Idaho ends up, and then I can work with the administrator of CMS. I just don't believe in premature opinions on complex topics of serious weighty matters," he said.
Sen. Lamar Alexander (R- Tenn.) applauded the proposed rule: "Millions of Americans who are between jobs and who pay for their own insurance will welcome this extended option for lower-cost, short-term policies," he said in a press release. "States will have the responsibility for making sure these policies benefit consumers."
Policy Experts and Lawmakers Weigh In
Conservative think tanks also cheered the idea.
"Short-term, limited duration health plans were restricted 3 weeks before President Obama left office. The Trump administration is right to propose lifting this ban because it will create new health options at more affordable prices. The Health and Human Services Department should go further and allow consumers and insurers to renew these policies as well as purchase them," Doug Badger, Heritage Foundation visiting fellow in Washington, D.C., and a senior fellow at the Galen Institute in Alexandria, VA, said in a press release.
However, critics of the proposed rule heartily disagreed.
"Allowing the indefinite renewability of short-term catastrophic plans -- together with the recently released association health plan rule -- threatens to split the individual insurance market. Young and healthy people could be tempted to purchase these low-premium plans with few benefits, while older and sicker people, like cancer patients, seeking more comprehensive health coverage could potentially be left struggling with rising premiums because of the market divide," Chris Hansen, president of the American Cancer Society Cancer Action Network (ACS CAN), said in a press release.
Eagan Kemp, a healthcare policy advocate for Public Citizen's Congress Watch Division, said the new rule would allow "unethical insurers to offer false promises that place consumers at risk.
"Few short-term plans cover prescriptions, and nearly all lack coverage for maternity care, preventive care, substance abuse treatment, and mental health," he said. "Enrollees who get sick may find themselves responsible for significant expenses, forcing them into debt for care and risking medical bankruptcy."
HHS will be taking comments for 60 days and anticipates any changes to take effect in "mid-to-late spring," Azar said.