Consumers will be able to buy plans that don’t comply with Obamacare for up to three years under a regulation issued Aug. 1 by the Trump administration.
The initial length of short-term limited-duration plans will be up to 364 days under the rule, but the plans can be renewed at the option of insurers for up 36 months, similar to plans sold to people buying coverage from former employers under the Consolidated Omnibus Budget Reconciliation Act (COBRA). The final rule will take effect 60 days from the date the rule is published in the Federal Register.
The plans typically don’t cover people with pre-existing conditions and don’t cover comprehensive benefits required by the Affordable Care Act. UnitedHealth Group Inc. was the top seller of short-term plans in 2017, earning premiums of nearly $42 million for plans covering 22,950 people, nearly 28 percent of the $150.6 million market, according to the National Association of Insurance Commissioners.
The health insurance and other health-care industries as well as proponents of the Affordable Care Act opposed making it easier to sell the noncompliant plans, saying they will attract healthier people and drive up costs in the ACA-compliant individual market with less healthy enrollees. But the Trump administration argues that affordable alternatives are needed for people who don’t receive ACA subsidies. The Department of Health and Human Services cites a 20 percent drop in individual market enrollment among people who don’t receive subsidies between 2016 and 2017.
The rule was issued by the HHS and two other departments: the Department of Labor and the Department of the Treasury.
The rule returns the permissible duration of the plans to the same length as before a 2016 Obama administration rule change that shortened them to sales of no more than three months, but the renewability provision allows for the sale of the plans for longer periods than was the case before that.
According to the NAIC report, about 122,500 people were covered by short-term plans in 2017.
Randy Pate, head of the Centers for Medicare & Medicaid Services’ Center for Consumer Information and Insurance Oversight at the HHS, predicted on a press call July 31 that in 2019 around 600,000 additional people will enroll in the short-term plans, and that number will increase until about 2022, when it peaks at around 1.6 million.
The rule is expected to pull no more than 200,000 people from the Obamcare insurance exchanges in 2019, Pate said. Eighty-seven percent of exchange enrollees receive subsidies in 2018, and they are unlikely to change coverage.
The difference in premiums paid between the noncompliant plans and ACA plans is substantial, Jim Parker, senior adviser for health reform to the secretary of HHS, said on the press call in advance of the rule’s release. In the fourth quarter of 2016, a short-term plan cost about $124 per month compared to $393 a month for an unsubsidized individual market compliant plan under ACA, he said.