The Biden administration proposed changes to short-term health insurance plans to encourage people to enroll in ACA plans, reduce spending on Obamacare subsidies by $120 million per year, and bring down ACA premiums by 0.5% by forcing healthy people to leave the short-term market.
Under current rules, consumers can purchase short-term health insurance plans with an initial contract period of up to 12 months and renew them for up to 36 months. Insurers can also offer renewal guarantees that allow enrollees to re-enroll without medical underwriting.
Short-term health insurance plans often have lower premiums (up to 60% lower than the lowest-cost ACA plans) and lower deductibles. They may exclude some ACA-mandated benefits like maternity care but offer broader provider networks and more comprehensive coverage for high-cost medical events.
The proposed rules would cancel short-term plans after just four months, leaving enrollees without coverage for up to 12 months if they develop expensive illnesses. This could result in uninsured periods and substantial medical bills for those affected.
The proposed rule aims to reduce ACA premiums by 0.5% by shifting healthier individuals from short-term plans to ACA plans, but it does not address the underlying issues in the ACA market, such as high premiums and declining insurer participation.
Renewal guarantees allow consumers to re-enroll in short-term plans without medical underwriting, ensuring that they can maintain coverage even if they develop a costly illness. This reduces the risk of being uninsured and facing high medical bills.
The 2018 rule restored short-term plans to a 364-day contract period and allowed renewals for up to three years. It reduced the uninsured rate by an estimated 1.8 million people and provided a viable alternative to ACA plans.
The proposed rule restricts short-term plans to four months, which is often shorter than the average unemployment duration. This leaves unemployed individuals without coverage for extended periods, increasing their financial and health risks.
States that allow short-term plans have seen better trends in ACA markets, including higher exchange enrollment (63% increase), more insurers (105% increase), and lower premiums compared to states that restrict short-term plans.
Legal challenges could argue that the rule is arbitrary, capricious, and contrary to law, as it cancels health insurance for sick individuals and creates gaps in coverage, which contradicts congressional intent to reduce uninsurance and protect those with pre-existing conditions.
On July 7, 2023, the Department of Health and Human Services, the Department of Labor, and the Department of the Treasury released a notice of proposed rulemaking to modify the definition of short‐term, limited‐duration insurance. During this policy forum, Michael F. Cannon and Brian Blase will discuss why the proposed rule would adversely impact individuals by eliminating consumer protections, which would throw sick patients out of their health insurance and leave them to face sky‐high medical bills without insurance for up to a year. Hosted on Acast. See acast.com/privacy) for more information.