By Abe Sutton
Short-term, limited-duration insurance (STLDI) may be here to stay despite legal attacks, poor branding, and a potential Democratic victory in the upcoming Presidential election.
Though the Obama administration curtailed STLDI, it is now likely to endure due to black letter administrative law and changes in circumstance since 2016.
In light of this, a potential Biden administration should package legislation codifying the current regulations with legislation increasing individual market subsidies. A package along these lines could appeal to both sides of the aisle.
In this post, I provide an overview of what STLDI is, explain why administrative law precedents complicate the reversal of current regulations, and propose a path forward for a potential Biden administration.
What is STLDI?
STLDI is an affordable insurance option with premiums as low as half those of comparable individual market premiums. The catch: Commensurate with its low costs, STLDI is not subject to the Affordable Care Act’s (ACA) coverage mandates.
When dealing with this form of insurance, patients need to be aware that they are not buying ACA-compliant plans. This form of coverage is not for everyone. There are reports of unscrupulous brokers pushing these plans without disclosing what coverage they were selling. Still, STLDI can be a lifeline for Americans who are ineligible for individual market subsidies. Even critics acknowledge that STLDI is better than going uninsured, something of increased importance in light of COVID-19.
Recognizing this reality, the Trump administration increased the maximum term of STLDI coverage from the 3-month cap set by the Obama Administration to 364 days (short-term). The administration also allowed for options to renew for a total of 36 months (limited-duration). Prior to the Obama administration, longstanding regulations allowed 12-month terms, and some insurers allowed renewal for longer durations.
Why will the current STLDI regulations be hard to reverse?
Standard of review
The STLDI regulations were revised through the official notice and comment channel. Revisions will therefore also have to be made through notice and comment, and be reviewed under the Chevron framework. Under Chevron, the government would need to show that curtailing these insurance plans is a reasonable policy choice.
2016 STLDI regulations reasoning
The Obama-era regulations met the standard of review by arguing: i. That unrestricted STLDI harms the individual market risk pool, and ii. That STLDI was never intended to serve as primary health coverage.
The first reason is less compelling in 2020 than it was in 2016. As explained in the revised rule, restricting STLDI had little impact on individual market enrollment. This is not surprising, as the vast majority of exchange enrollees are subsidized and therefore unlikely to leave for an unsubsidized product.
That STLDI was never intended as primary insurance is also not compelling. These plans were intended to be an option for Americans who would otherwise go uninsured. CBO estimates that reversing the current regulations would increase the number of uninsured Americans. Curtailing STLDI runs directly counter to Congress’ purpose in authorizing the plans and later excluding them from the ACA’s requirements.
Need for new reasoning
A potential Biden administration would need a new line of reasoning to curtail STLDI. The new reasoning would need to confront the old policy to some degree to justify the new policy, based on the reliance interests of those who purchase these insurance plans and FFC v. Fox. Past agency reasoning, the record, and underlying circumstances need to justify the change, as laid out in State Farm.
In developing this reasoning, a potential Biden administration should be aware that courts may be skeptical of new reasoning if it fails to give separate meaning to the terms “short-term” and “limited-duration.”
While it is plausible that a potential Biden administration could develop a new line of reasoning, the next section suggests an alternative approach they should consider.
What should a potential Biden administration do?
Potential STLDI regulatory revision should be weighed against expected legal challenges and the political cost of taking away insurance. It would be wiser for both policy and political reasons to open up new, affordable options. Doing so might tempt people away from STLDI, while keeping it as an option.
A potential Biden administration should use the current regulations as leverage in negotiations with congressional Republicans. Proposals to increase exchange subsidies may be more likely to gain bipartisan support if they include a statutory codification of the STLDI regulations in the deal — a worthwhile tradeoff for both sides.
While this post suggests that STLDI is not especially vulnerable to federal regulatory change, in the event that Biden is elected President, growth in the health insurance sector is more likely to occur on the exchanges.