Ripple in ACA Risk Pool Could Beach Short-Term Health Insurance

(This was updated on August 15, 2016, with new developments)

In a proposed regulation published in July 2016, the Centers for Medicare and Medicaid Services (CMS) proposed to shorten the maximum length of short-term health insurance policies from 12 months to three months. In general, short-term health insurance policies offer less generous coverage at a lower cost than health insurance policies that must meet Affordable Care Act (ACA) standards. The move to curtail short-term health insurance is part of a larger effort by the Obama administration to strengthen the ACA risk pool (a market in which the majority of insurers are losing money). Limiting the purchase of short-term insurance would presumably bring more and healthier consumers into profit-challenged ACA markets.

However, the proposed rule has sparked increasingly vocal opposition from some state regulators and consumer groups. A consensus of states, represented by the National Association of Insurance Commissioners (NAIC), came out against the bill, arguing that the rule will limit access to products that increasing numbers of consumers want to buy. Critics argue that ACA plans are too expensive, and current purchasers of short-term insurance might choose not to purchase any health insurance without these low cost options.

In addition, industry interests aligned with short-term insurance are voicing their opposition. For example, Health Pocket, the operator of an online site used to compare health insurance plans, filed a study outlining the types of consumers who would be hurt by the proposed rule, including those who cannot buy ACA insurance outside the enrollment period due to coverage lapses, low-income individuals in states that have not expanded Medicaid, and those who cannot afford exchanges plans, such as students. Trade associations representing agents and brokers have also criticized the proposed rule.

In contrast, certain Blue state insurance commissioners (including Washington state) and consumer representatives affiliated with the NAIC support the proposed regulation, stating that short-term plans “undermine the marketplace risk pools” and do not necessarily offer adequate insurance coverage. America’s Health Insurance Plans (AHIP) and Blue Cross Blue Shield Association (BCBSA) also support limits on short-term plans; however, both associations recommended that the agencies consider allowing short-term policies for up to four months for those needing coverage between employer plans.

The comment period on the draft regulation closed August 9, 2016, and intense policy discussion is now underway regarding the future of short-term health insurance. The final regulation will likely be published in the fall.