Short-term health plans that don’t meet Obamacare standards can remain in place after the D.C. Circuit ruled Friday the Trump administration’s decision to expand them didn’t violate the Affordable Care Act or the federal standards for health insurance coverage.
These short-term plans allow people to buy health insurance when they experience a gap in coverage due to circumstances like being out of work. The plans aren’t required to offer the same 10 essential benefits required of ACA-covered plans, which include mental health and substance use treatment, emergency services, and preventive and prenatal care.
More and more people are reportedly enrolling in short-term health plans, which one health scholar said threatens to raise health insurance premiums in the federal marketplace.
The Trump administration in 2018 redefined short-term limited duration plans, expanding those that qualify as short-term from the three-month plans that were previously allowed to include 12-month plans. Those 12-month plans can then be extended and renewed for up to three years. The Obama administration had shortened the duration of plans to three months in 2016.
The Association for Community Affiliated Plans (ACAP) and others sued, arguing that allowing people to remain on those limited plans for up to three years violated the ACA and was arbitrary and capricious behavior on the part of the Department of Health and Human Services.
In a 2-1 decision, the U.S. Court of Appeals for the District of Columbia Circuit disagreed. In affirming the lower court’s decision, the appeals court said Congress delegated authority to the HHS to administer the ACA as it saw fit.
The HHS changed the definition of short-term, limited-duration plans to “respond to concerns about increasing premiums and decreasing enrollment,” the court said in an opinion delivered by Judge Thomas Griffith. “The Departments decided that expanding affordable coverage options was the way to go.”
ACAP also argued the rule violated federal standards for health insurance coverage created by the Health Insurance Portability and Accountability Act (HIPAA). The law exempted short-term plans from individual market regulations, but the district court said Congress didn’t define what coverage constituted a short-term limited duration plan.
Griffith said Judge Judith Rogers had made a prudential objection in her dissent, arguing that short-term limited duration plans aren’t good for consumers and should therefore be restricted as much as possible.
But Griffith said “so long as the departments have acted within the bounds of their statutorily delegated authority, that policy judgment is theirs to make.”
“When Congress delegates decision making authority to an agency, it sacrifices control for flexibility,” he said. “Delegation empowers a comparatively nimbler actor to respond to changed circumstances and unanticipated consequences. Sometimes (perhaps often), the agency will have to make policy trade-offs in real-world settings that Congress did not imagine.”
One health scholar said these short-term products are likely to raise premiums in the ACA marketplace for people with pre-existing conditions and could end up hurting patients who are enrolled in short-term plans during the Covid-19 pandemic.
“I think it’s both bad for patients and for the broader insurance market,” said Katie Keith, a health law professor at Georgetown University.
A spokesman for the ACAP said the group plans to seek the full court’s review of the three-judge panel decision.
“We are disappointed in the court’s decision but remain firm in our belief that junk insurance plans violate both the Affordable Care Act and the Administrative Procedure Act,” Margaret Murray, ACAP’s CEO, said in a statement. “We’re confident the full D.C. Circuit will agree.”
“Now more than ever, people need access to high-quality, comprehensive insurance that gives them peace of mind and guaranteed benefits—not a junk plan that may leave them with nothing more than hundreds of thousands of dollars in medical bills,"Murray said.
The House Committee on Energy and Commerce released a report in June after investigating nine insurance companies that offer short-term plans. The report found about 3 million people had enrolled in those plans in 2019, an increase of 600,000 people from 2018.
“The significant uptick in enrollment in 2019 indicates that these plans represent a significant and growing proportion of the individual marketplace,” the report said.
The case is Ass’n for Community Affiliated Plans v. U.S. Dep’t of the Treasury, D.C. Cir. App., No. 19-05212, 7/17/20.