State policy variations related to these plans could have significant impacts on the overall insurance market. Here’s what you need to know.
The secretary of HHS, earlier this year, proposed a regulation to increase the maximum coverage term under short-term limited duration (STLD) insurance plans. The hope is to create more options for consumers to purchase less expensive health plans that provide varying levels of coverage, says Denise Stefan, president, Engage Insurance, a subsidiary of Engage Professional Employer Organization, a national human resources outsourcing firm.
Rules issued during the Obama Administration limit these plans to no more than three months in duration. The proposed regulation would allow short-term coverage to be offered for up to one year (364 days), or possibly longer.
Some states push back
Some states are taking action to guard against, what some fear, will be an influx of skimpy coverage that could leave consumers with large financial liabilities and destabilize their insurance markets. “While STLD plans can provide cheaper coverage for those who can pass an insurer’s health screening, consumers in less-than-perfect health will not have access to those plans and will have to remain in the ACA-compliant market,” says Sabrina Corlette, JD, research professor and project director at Georgetown University’s Center on Health Insurance Reforms, where she studies private health insurance policy. “Consequently, when insurers face a market with a smaller and sicker pool of enrollees, they will either exit or raise their prices to protect themselves, leaving people with pre-existing conditions and those who want comprehensive coverage with higher costs and fewer plan choices.”
California is considering banning STLD plans, stating that limited coverage does not appropriately protect consumers and disqualifies people who are sick from buying coverage, which is discriminatory. Other states including Connecticut, Maryland, New Jersey, Hawaii, Minnesota, Rhode Island, Vermont, Washington, and the District of Columbia are rallying around the need to restore individual mandate penalties, Stefan says. In Alaska, Minnesota, and Oregon, lawmakers are considering policies that reintroduce the concept of reinsurance funds to help protect health insurers from high-cost enrollees and help lower costs for everyone else.
Others embrace change
Some states support the Administration’s efforts to introduce new healthcare coverage alternatives. “States are looking for different avenues that will allow consumers to access coverage, and some think that expanding STLD plans, despite their lack of consumer protections, will provide a lower premium option,” Corlette says.
Missouri, for example, has passed a bill that would codify the Trump Administration’s proposal to extend the duration of STLD plans to 364 days. Minnesota’s legislature is considering a similar proposal. Other states, such as Iowa and Idaho, are hoping to expand other alternative coverage arrangements that can skirt the ACA’s market rules and consumer protections, Corlette says. These states are passing legislation and issuing guidance allowing insurers to offer plans that provide less comprehensive coverage and discriminate against sick people, resulting in a much lower sticker price.
Short-term plans could cause large differences in health insurance costs and options state-to-state, says Saeed Aminzadeh, CEO, Decision Point Healthcare Solutions, a predictive analytics management company. “Essentially, these plans play in a relatively unregulated field, with varying (if any) minimum benefits and varying rules governing who can be covered and what can be underwritten,” he says. “With this comes massive differences in costs and products, without a baseline on how these plans can be compared.”
If more Americans use STLD plans, Margaret Murray, Managed Healthcare Executive editorial advisor and CEO, Association for Community Affiliated Plans (ACAP), which represents plans that provide health insurance through publicly-supported programs, expects an unregulated market to arise that will ultimately attract the healthy, and turn ACA-compliant plans into ones that mainly attract high-risk individuals. ACAP recently contracted with Wakely Consulting Group to study how these plans would affect the ACA-compliant market over time. Over time, Wakely estimates that the proposed STLD plan changes and repeal of the individual mandate would lead to a 12.8% increase in premiums, and as many as 3.9 million people dropping ACA-compliant coverage.
Aminzadeh says short-term insurance plans will not be effective in lowering costs and improving quality. “Any initiative to reduce costs and avoidable utilization and improve quality works best when a member is continually engaged-they’re visiting their doctor, taking their medications, getting preventive screenings, and so forth,” he says. “Short-term plans, by design, will not promote these types of practices. In fact, these programs promote episodic care, which in turn can be a catalyst for increased overall costs.”
States that choose to allow the proliferation of alternative coverage, such as STLD plans, will find that their market becomes segmented, Corlette says. “Healthy people will flock to cheaper and less comprehensive plans; sick people and those who need comprehensive coverage, such as a couple wanting to start a family, will be forced to stay in the ACA-compliant market. That market will wither without healthy risk, and premiums will rise, driving even more people to cheaper alternatives. This is often referred to as the insurance death spiral, and it’s all too common when one set of insurers is allowed to play by a different set of rules.”
The bottom line, Aminzadeh says, is that there will be confusion, inconsistency, and incomparability.
Karen Appold is a medical writer in Lehigh Valley, Pennsylvania.