The Trump Administration has issued a potentially highly-significant proposed rule intended to expand the availability of short-term, limited duration insurance policies that are exempt from Affordable Care Act (ACA) qualified health plan standards. Under the proposed rule, issued by the Departments of Treasury, Labor, and Health and Human Services (the "Departments"), the maximum duration of this "short-term" coverage would be extended from less than three months to less than 12 months (taking into account any extensions that may be elected by the policyholder without the issuer's consent). The contract and application materials for these short-term, limited-duration plans would be required to include standard notices to inform the public that the plans are not required to comply with federal requirements for health insurance (principally those in the ACA), and additionally, for those policies having a coverage start date prior to January 1, 2019, that they do not provide minimum essential coverage and the beneficiary may have to make a payment as a consequence (i.e., the ACA individual responsibility payment). The proposal states that the premiums for these ACA non-compliant plans are likely to be lower than those for ACA-compliant plans, citing one report showing a difference of $124 per month vs. $393 per month in average monthly premiums for such plans in the fourth quarter of 2016. The ACA requirements with which issuers of these plans are not required to comply include prohibitions on denying coverage to persons with preexisting conditions and on varying premiums based upon health status, requirements to cover essential health benefits, restrictions on average and lifetime benefit caps, and guaranteed renewability, among others. As such, issuers of such policies would be permitted to engage in "medical underwriting" (referred to in the proposal as pricing "in an actuarially-fair manner (by which the Departments mean that it is priced so that the premium paid by an individual reflects the risks associated with ensuring the particular individual or individuals covered by that policy)." Moreover, the issuer could refuse to renew policies for beneficiaries who develop chronic health care conditions. The Departments noted that these changes may impact individual market risk pools for ACA-compliant plans, but they estimate that in 2019 only 100,000 – 200,000 individuals will elect to enroll in short-term, limited duration plans after this change; the Departments seek comments on these estimates, as well as on various other aspects of the proposed rule. Comments on the proposed rule will be accepted until April 23, 2018.
This article is presented for informational purposes only and is not intended to constitute legal advice.