Feds Tightening Use Of Short-Term Health Insurance

The Obama administration wants to limit consumers' use of short-term insurance plans, which a growing number of Americans have been buying in response to the Affordable Care Act's requirements to have health coverage.

This week, the U.S. Department of Health and Human Services proposed limiting short-term health policies to a term of three months. Currently, short-term policies can be issued for a term of up to one year.

In announcing the proposal, HHS said it was strengthening the risk pool of participants in the health insurance marketplace by tightening the rules on short-term plans. Abuses in the use of short-term plans, HHS said, "exploit gaps in current rules to use medical underwriting to keep some of the healthiest consumers out of the Affordable Care Act's single risk pool."

Short-term limited duration coverage is health care coverage issued for a short period of time.  Because short-term limited duration plans are designed to fill only very short coverage gaps, this coverage is not subject to any of the key rules governing the ACA’s single risk pool. These plans  can be priced based on health status (medically underwritten), can discriminate against consumers with pre-existing conditions, and do not have to cover essential health benefits.  Some issuers are now offering short-term limited duration plans to consumers as their primary form of health coverage for periods that last nearly 12 months, allowing them to target only the healthiest consumers while avoiding consumer protections.

By keeping these consumers out of the ACA single risk pool, such abuses of limited duration coverage increase costs for everyone else, and they could have a greater impact over time if allowed to become more widespread, HHS said in a news release.

Under the new rules, short-term policies may be offered only for less than three months, and coverage cannot be renewed at the end of the three month period. The proposed rule also improves transparency for consumers by requiring issuers to provide notice to consumers that the coverage is not minimum essential coverage, does not satisfy the health coverage requirement of the ACA, and will not prevent the consumer from owing a tax penalty.

The short-term insurance rule was one in a series of actions HHS said it is taking during the month of June in regard to the ACA. Other actions include:

• Beginning full implementation of the Special Enrollment Confirmation Process, which ensures that eligible individuals continue to have access to coverage through Special Enrollment Periods (SEPs), but prevents people from misusing the system to enroll in coverage only if they get sick.
• Continuing the efforts to reduce data-matching issues (DMIs). HHS said its outreach, education, and operational improvements have contributed to a sharp reduction in total data matching issues. The agency also reported a nearly 40 percent increase in the amount of   documents submitted to help resolve income and citizenship and immigration data matching issues. Improving the resolution of DMIs benefits the risk pool because it keeps eligible consumers, often younger and healthier consumers less motivated to overcome obstacles such as extra paperwork, from losing coverage mid-year, HHS said.

Susan Rupe is managing editor for InsuranceNewsNet. She formerly served as communications director for an insurance agents' association and was an award-winning newspaper reporter and editor. Contact her at [email protected].

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Susan Rupe is managing editor for InsuranceNewsNet. She formerly served as communications director for an insurance agents' association and was an award-winning newspaper reporter and editor. Contact her at [email protected].