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Short-Term Limited Duration Insurance Can Now Be Less Short-Term

Short-term, limited-duration insurance was designed as a temporary gap-filler while a person transitions from one kind of health insurance to a different plan or coverage. In 2016, recognizing its serious limitations, an Obama Administration rule mandated that coverage of short-term, limited-duration insurance be limited to three months, including any period of renewal.

But due to a final rule in August 2018 from the Trump Administration, short-term, limited-duration insurance coverage contracts can now last as long as one day short of a year, and can last as long as three years with renewals or extensions. The Trump Administration explained in its final rule that it selected this standard to promote access to choices of health coverage and to individual health insurance coverage. The rule also acknowledged this kind of insurance may not be the most appropriate or affordable for everyone. As of Tuesday, October 2, insurers can sell these “skimpy” plans for the extended duration.

Many proponents of short-term, limited-duration insurance, such as Doug Badger of the Heritage Foundation, see it as just another choice—and often a more affordable option, particularly for consumers that don’t qualify for subsidies that lower Affordable Care Act (ACA) policy costs. Alex Azar, the Health and Human Services Secretary, recently praised the Trump Administration’s expansion of short-term plans, stating that they’re 50-80 percent cheaper than ACA-regulated plans.

But despite the often enticingly cheap premiums, short-term, limited duration insurance plans aren’t required to comply with the ACA’s consumer protections. And a combination of often high deductibles and other limitations can result in higher costs than consumers would expect based on the premiums alone. The limitations on these plans significantly restrict who is eligible and who will be attracted to these plans.

As reported in Health Affairs:

“[s]hort-term insurers can charge higher premiums based on health status, exclude coverage for preexisting conditions, impose annual or lifetime limits, opt not to cover entire categories of benefits (such as substance use disorder treatment or prescription drugs), rescind coverage, and require higher out-of-pocket cost-sharing than under the ACA”

The ability of short-term plans to opt-out of covering essential health benefits—required of ACA-compliant plans—also enables these policies to deny coverage for ambulatory patient services, maternity and newborn care, mental health services, and preventive care. These limitations of the short-term, limited duration plans make them less expensive than plans that comply with the ACA, and therefore more appealing to younger, healthier people. As a result, many fear that premiums on the ACA exchanges could increase.

Commenters on the February 2018 proposed rule expressed concern that the plans discriminate against many populations, including: “those with serious illnesses and other preexisting conditions including mental health and substance abuse disorders, older consumers, women, transgender patients, persons with gender-identity-related health concerns, and victims of rape and domestic violence.” The Trump Administration found in its final rule, however, that there was not persuasive evidence of such discrimination.

Seven health care groups responded to the rule by filing suit in the U.S. District Court for the District of Columbia in September, arguing the rule should be set aside because it is arbitrary and capricious and is contrary to law. The groups argued that, as a result of the rule, obtaining health care and coverage would be more costly—and possibly impossible—for some people with pre-existing conditions, thereby undermining the purpose of the ACA.

Related post: Stopping Nibbles around the ACA: Advocacy Organizations File Suit

Because short-term plans are state-regulated, we can expect varied responses to the rule across the U.S. In Oklahoma, for example, Insurance Commissioner John Doak has advocated his support for these policies, stating that the policies “are not junk, as liberals suggest, but affordable options for millions left behind in the Obamacare disaster.” Doak announced in September his intention to work with lawmakers to make state law—which currently place nonrenewable six-month limits on short-term plans—less restrictive.

As in Oklahoma, Indiana state law still restricts short-term, limited duration plans to nonrenewable six month limits. But in contrast to Oklahoma, Indiana’s Insurance Commissioner, Stephen Robertson, issued a bulletin in September emphasizing that state law regulating short-term, limited duration plans is not preempted by the final rule. Accordingly, as of October 2, while insurers who were selling three-month policies may submit a filing to sell six-month policies, short-term, limited duration insurance plans cannot extend beyond that six-month limit and may not be renewed.

And in California, Governor Jerry Brown approved Senate Bill No. 910, which will prohibit plans lasting under a year beginning in 2019. This bill will thereby forbid insurers from selling short-term, limited duration plans in the state.

It’s too soon to tell exactly what the impact of the Trump Administration’s rule will be. However, the upcoming elimination of the individual mandate penalty for people whose policies don’t comply with the ACA could result in more young, healthy consumers seeing it as financially advantageous to purchase short-term, limited duration plans.


Rebecca Friedman is a 2018-2019 Student Fellow at the Petrie-Flom Center.

Rebecca Friedman

Rebecca Friedman graduated from Harvard Law School in 2019. Prior to becoming a Student Fellow, she participated in the Health Law and Policy Clinic with HLS' Center for Health Law and Policy Innovation. At the time she completed her Fellowship, Rebecca planned to work at Charlotte Center for Legal Advocacy in Charlotte, North Carolina as an Equal Justice Works Fellow sponsored by Kilpatrick, Townsend & Stockton LLP. There, Rebecca will provide direct representation to Medicaid beneficiaries experiencing legal challenges as North Carolina transforms its Medicaid system to managed care, and will work to ensure that Medicaid beneficiaries facing legal issues as a result of social determinants of health receive appropriate support. As a Petrie Flom Center Student Fellow, Rebecca studied the potential for Medicaid to cover doula services and analyzed how racial and socioeconomic disparities in prenatal care and childbirth could be mitigated as a result. The current title of Rebecca’s paper is “The Feasibility and Potential Impact of Broader Medicaid Coverage of Doula Services on Racial and Socioeconomic Disparities in Birth Outcomes.”

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