Insurance Commissioner Warns Proposed Short-Term, Limited-Duration Rule Is Attack on Health Care, Harming Consumers, Destabilizing Market

HARRISBURG, Pennsylvania, April 26 -- The Pennsylvania Insurance Department issued the following news release:

Insurance Commissioner Jessica Altman has submitted comments on behalf of the Commonwealth of Pennsylvania on the federal government's proposed rule on the expansion of short-term, limited-duration health plans, warning that the proposed changes could increase potential for consumer harm and market destabilization.

"Consumers will be harmed as they face confusing products and less transparency, and insurers may need to raise rates to continue to offer individual coverage," Altman said. "Instead of providing more options at lower cost, this rule would actually increase premiums for consumers who rely on Affordable Care Act coverage to meet their health care needs."

Short-term limited-duration insurance provides temporary health coverage to individuals who have an unexpected gap in coverage or need health care for a brief period. The plans generally have lower premiums but significant coverage limitations.

To discourage use of short-term plans as an alternative to the comprehensive coverage made available under the ACA, the Obama Administration limited the plans to three months and prohibited renewal.

The proposed rule, which was issued pursuant to an Executive Order last year and released by the U.S. Departments of Health and Human Services, Labor, and the Treasury on Feb. 20, would allow for short-term plans to be renewable and cover consumers up to 12 months. The rule would not prohibit health insurers from discriminating based on a consumer's medical history and pre-existing conditions because short-term plans are not subject to ACA consumer protections.

The changes under the proposed rule could lure a significant number of healthier individuals away from their ACA plan and into short-term limited coverage, which would skew risk in the individual market risk pool and, therefore, destabilize the market.

A recent study by the Urban Institute predicts a national shift of 2.1 million enrollees moving away from the ACA-compliant individual market -- a more significant impact than the Trump Administration's prediction of 100,000 to 200,000 enrollees nationally. The Urban Institute study projects that 87,000 Pennsylvania enrollees could shift away from the individual market.

Some consumers consider buying these plans as a low-cost alternative to coverage under the ACA. However, despite the Trump Administration's assertions that they are "an appealing and affordable alternative," short-term limited duration policies do not meet many of the requirements of comprehensive medical coverage under the ACA and consumers who purchase these plans this year could still face a tax penalty, since the individual mandate repeal does not take effect until 2019.

"We reject the notion that short-term, limited-duration insurance is an affordable alternative to comprehensive ACA-compliant insurance," Altman said. "Consumers may experience an upfront savings in premiums, but the 'affordability' of these short-term plans will likely prove to be illusive, as those who need health care will run up against exclusions and limitations on coverage and provider access that will ultimately prove costly."

The Pennsylvania Insurance Department has received numerous complaints from consumers whose short-term, limited-duration plans failed to reimburse them for services that were excluded based on the fine print of the policies or who were denied coverage under one of these plans because of a pre-existing condition. The Department has also revoked the licenses of eight producers who misrepresented the coverage available to consumers who purchased short-term, limited-duration insurance.

"While the proposed rule contemplates written notice to inform the consumer of the plan's limitations, we remain concerned that consumers will not be fully informed at the time of purchase," Altman said. "I am deeply concerned that we will continue to receive complaints from consumers regarding their short-term, limited-duration plans and potential deceptive practices by some insurance producers."