UPDATE: CMS seeks expansion of short-term plans to sidestep ACA
Update: This story was updated to include comments from hospitals and other industry groups.
HHS issued a proposed rule on Tuesday that expands the availability of short-term health insurance by allowing the purchase of plans providing coverage for up to 12 months, the latest in the Trump administration's plans to weaken the Affordable Care Act. The action builds off a request for information by HHS last June on ways to increase affordability of health insurance.
The current maximum period for such plans is less than three months, a change made by the Obama administration in 2016. The proposed rule would mark a return to the pre-2016 era, but CMS noted that it is seeking comment on offering short-term plans for periods longer than 12 months.
Short-term plans are not required to comply with federal rules for individual health insurance under the ACA, so the plans could charge more for those with preexisting conditions and not provide what the ACA deemed essential health benefits like maternity care.
The proposed rule builds off of an executive order President Donald Trump signed in October, which instructed the federal government to explore more access to association health plans, expanding short-term limited duration plans and changes to health reimbursement arrangements or HRAs.
Consumers buying these short-terms plans could lose access to certain healthcare services and providers and experience an increase in out-of-pocket expenditures for some patients, according to the proposal.
The short-term plans “would be unlikely to include all the elements of ACA-compliant plans, such as the preexisting condition exclusion prohibition, coverage of essential health benefits without annual or lifetime dollar limits, preventive care, maternity and prescription drug coverage, rating restrictions and guaranteed renewability,” according to the proposed rule.
The Trump administration argues that expanding access to short-term plans is increasingly important due to rising premiums in the individual markets.
But if young and healthy people leave the individual market for short-term plans, it could contribute to an unbalanced risk pool. HHS itself states that the exodus of young and healthy exchange members could contribute to rising premiums within the ACA exchange markets.
“If individual market single risk pools change as a result, it would result in an increase in premiums for the individuals remaining in those risk pools,” the proposed rule stated.
But when asked about concerns that the idea might hurt the stability of the ACA marketplaces by siphoning healthy people away, CMS Administrator Seema Verma argued there would be little impact.
“No, we don’t think there’s any validity to that — based on our projections only a very small number of healthy people will shift from the individual market to these short-term limited duration plans. Specifically, we estimate that only 100,000 to 200,000 people will shift. And this shift will have will have virtually no impact on the individual market premiums,” Verma said on a press call.
But the insurance lobby cautioned that the action could increase insurance prices for the most vulnerable.
The American Hospital Association and Association for Community Affiliated Plans also slammed the short-term plans, saying they would increase the cost of comprehensive coverage.
“Short-term, limited-duration health plans have a role for consumers who experience gaps in coverage. They are not unlike the small spare tire in a car: they get the job done for short periods of time, but they have severe limitations and you’ll get in trouble if you drive too fast on them," ACAP CEO Margaret Murray said in a statement.
"While we are reviewing the proposed rule to understand its impact on the people we serve, we remain concerned that expanded use of short-term policies could further fragment the individual market, which would lead to higher premiums for many consumers, particularly those with pre-existing conditions," said Kristine Grow, SVP of communications at America's Health Insurance Plans.
HHS anticipates most individuals switching from individual market plans to short-term coverage plans would be relatively young or healthy and not eligible to receive ACA's premium tax credits.
CMS said the proposal is one to help the 28 million Americans without health insurance, pointing to the 6.7 million who chose to pay the individual mandate penalty in 2015 as evidence that ACA-compliant plans are too expensive.
“In a market that is experiencing double-digit rate increases, allowing short-term, limited-duration insurance to cover longer periods gives Americans options and could be the difference between someone getting coverage or going without coverage at all,” Verma said in a statement.
Senate HELP Committee Chair Lamar Alexander, R-Tenn., praised the action, but cautioned that states still have a responsibility to protect consumers.
“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. States will have the responsibility for making sure these policies benefit consumers,” Alexander said in a statement.
Democrats largely oppose the move, arguing it will further destabilize the market for millions of Americans in the ACA exchanges. "Widespread marketing of these bare bones, junk plans will further destabilize health insurance markets, and will lead to higher premiums for everyone," a group of House Democrats said in a joint statement.
As Republicans are not likely to take up ACA repeal again any time soon, the Trump administration has been working to pare back the law in the past several months. It halved the enrollment period and stopped paying cost-sharing reduction payments to insurers. Also, the recent tax overhaul included a repeal of the law’s requirement that most people have coverage.