Under the “Department of Government Efficiency (DOGE)” deregulatory initiative, the Departments of Labor, Health and Human Services (HHS), and Treasury are reviewing rules imposed by the Biden administration, which restricted short-term, limited-duration insurance (STLDI) plans to four-month terms with no option to renew.
The departments will undertake the notice-and-comment rulemaking process to consider changes to STLDI, a period that lasts at least 60 days.
“Until future rulemaking is issued and applicable, the Departments do not intend to prioritize enforcement actions for violations related to failing to meet the definition of ‘short-term, limited-duration insurance’ in the 2024 final rules, including the notice provision,” a statement by the departments said.
Stranded Policyholders
The Biden rules hamstrung policyholders because if they got sick toward the end of the four months, a new policy would not cover the now-preexisting condition. Such policyholders would have to wait until November to purchase an Obamacare plan.
Because the plans are exempt from coverage requirements under the Public Health Service and the Affordable Care Act, premiums cost on average $151 a month. Consumers can purchase the plans in minutes.
In his first administration, President Donald Trump issued an executive order allowing states to offer the plans for up to one year with an option to renew without underwriting for three years. In 2020, a U.S. Court of Appeals upheld the Trump change.
Plans That Work
Consumers gravitate to short-term plans for a multitude of reasons, says Kansas state Senator Beverly Gossage (R-District 9), an independent health insurance consultant and agent.
“My clients who choose STLD are typically middle-income, leaving an employer with coverage to be self-employed or to an employer with no health plan, a spouse of a Medicare beneficiary needing temporary coverage until they are eligible themselves, leaving a parent plan, or waiting for open enrollment of an ACA plan,” said Gossage. “Usually, these folks need three months to three years of affordable coverage.”
The Trump administration’s decision not to prioritize enforcement of the Biden rules will come in handy for people who benefited from the STLDI rules during Trump’s first term, says Gossage.
“They have the peace of mind in knowing even if they develop a costly health condition, they can stay on the plan without a premium increase and their plan will cover them since they are not subject to re-underwriting for up to 24 months,” said Gossage. “And the policies save them 30 to 40 percent in premium, and sometimes a lower out-of-pocket than an ACA plan.”
Confused Market
Although the announcement is encouraging, consumers should not expect a flood of short-term plan options, says Michael Cannon, director of health policy studies at the Cato Institute.
“The impact of this announcement will be almost nothing,” said Michael Cannon, director of health policy studies at the Cato Institute. “No insurer is going to invest in better products, with more consumer protections, until the federal government formally changes the rules.”
Now may be a golden opportunity for STLDI reform, says Cannon,
“The Trump administration should go further than it did in its 2018 rule,” said Cannon. “We learned from that [Biden] rule that the industry needs more assurance of regulatory certainty if it is going to invest in long-term health insurance with greater consumer protections. Really, the only way to provide them that certainty is to have Congress change federal statute.”
States have the authority to regulate their health insurance markets. When Trump made changes to STLDI plans in his first administration, only 15 states took advantage of the Trump rules, according to the Manhattan Institute.
Pushing Obamacare
The reason previous administrations restricted STLDI was to push more Americans into Obamacare plans, says Brian Blase, president of the Paragon Health Institute.
“Unfortunately, the past two Democratic administrations punished Americans who found this coverage valuable—restricting the amount of permissible contract periods to only a few months,” wrote Brian Blase in a blog post for the Paragon Institute.
When Trump “restored the historical contract period of 364 days, permitting renewals up to three years” in 2018, writes Blase, “states that fully permitted short-term plans had much better trends—in terms of premiums, enrollment, and insurer participation—in their ACA individual market than states that restricted short-term plans.”
AnneMarie Schieber ([email protected]g) is the managing editor of Health Care News.
AnneMarie Schieber is a research fellow at The Heartland Institute and managing editor of Health Care News, Heartland’s monthly newspaper for health care reform.
