Limit short-term health plans to a...short term? Buyers and sellers speak out

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My last post considered a rule proposed by the Departments of Health and Human Services, Treasury and Labor to restore a three-month term limit on so-called Short Term, Limited Duration (STLD) health plans. Those plans are currently available for year-long terms in some states, renewable for up to three years.

My main point was that if the removal of the ACA’s original income cap on subsidies by the American Rescue Plan Act (ARPA), extended through 2025 by the Inflation Reduction Act, is not further extended, STLD plans will once again be the only viable option as of 2026 for some modestly affluent non-elderly people who lack access to employer-sponsored or other insurance. For that reason, I suggested that the proposed rule automatically sunset if the income cap on subsidies returns.

To review briefly: STLD plans are not regulated as insurance and not compliant with ACA rules for individual health plans. They are medically underwritten, do not have to cover the ACA’s Essential Health Benefits (drug and mental health benefits are often excluded or very limited), are not subject to the balance billing protection provided by the No Surprises Act, and generally cap benefits at $1 million or $2 million. Some but not all STLD plans have provider networks (and so some balance billing protection) and annual out-of-pocket caps for covered benefits.

For further perspective I turned to the comments submitted so far in response to the proposed rule. There are just 43, from a mix of consumers and brokers (as opposed to more than 25,000 for the FDA’s proposed ban on most noncompete agreements). All, perhaps not surprisingly, ask that the allowable STLD term not be shortened as proposed.

A caveat about curtailing short-term limited duration health plans

 Note: All xpostfactoid subscriptions are now through Substack alone (still free), though I will continue to cross-post on this site. If you're not subscribed, please visit xpostfactoid on Substack and sign up! 

It’s generally a good thing when the Biden administration repeals a Trump-era administrative rule. Under current ACA marketplace conditions, a rule proposed by HHS, Treasury and the Department of Labor to restore a three-month term limit on so-called Short Term, Limited Duration (STLD) health plans is a good thing. In a rule finalized in August 2018, the Trump administration extended the allowable duration of such plans to a year, renewable for up to three years, creating an alternative market to the ACA-compliant individual market.

STLD plans by legal definition are not insurance and not subject to regulation by the ACA, HIPAA, the No Surprises Act, or the law mandating parity between physical and mental health coverage (MHPAEA). STLD plans are medically underwritten, meaning that applicants with pre-existing conditions can be charged more, denied coverage altogether, or offered coverage with the pre-existing condition excluded. These plans do not have to cover the ACA’s Essential Health Benefits and often exclude drug coverage and mental health care. They often have no provider network - -instead, they set their own rates in payment to medical providers and thus leave enrollees subject to extensive balance billing — which is still possible, as these plans are not subject to the No Surprises Act, which began protecting people in ACA-compliant plans in 2022. (In many markets, however, United HealthCare does offer STLD plans that have a provider network.)

For the Trump administration, which inherited Republicans’ dead-end opposition to and demonization of everything ACA, STLD plans represented a kind of ideal, harking back to the Shangri-la of the pre-ACA individual market, in which plans without restrictive provider networks (and with coverage limitations similar to those of STLD plans) cost lucky, healthy enrollees considerably less than unsubsidized ACA-compliant plans would later cost. Seema Verma, Trump’s CMS director, lionized “choice” — a market teeming with lightly regulated options offering very partial coverage — and that is what the Trump administration created. Verma even floated ACA “waiver concepts” inviting the states to seek approval for providing federal subsidies for ACA-noncompliant plans.

If HHS cuts back short-term plans, they'd best be sure that the ARP subsidy boosts are extended

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 Alice Ollstein of Politico relays:

[HHS Secretary] Becerra says he's "in the midst of rulemaking" to crack down on skimpy health insurance plans that Democratic lawmakers and activists call "junk plans." No word on when that rule could come out, but it would undo the Trump admin's rule opening the door to more of those plans.

The "skimpy health plans" are so-called short-term limited duration (STLD) plans promoted and facilitated by the Trump administration. STLD plans are not ACA-compliant: they don't have to cover the ACA-mandated Essential Health Benefits (and usually don't provide coverage of most prescription drugs), and they are medically underwritten, meaning that applicants with pre-existing conditions can be charged more, denied coverage altogether, or offered coverage with the pre-existing condition excluded.

I almost got snared in the short-term health insurance market

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Sarah Gantz, a Philadelphia Inquirer reporter, has done some great work spotlighting people who were snared by sales pitches for short-term health plans that left them with huge bills when they got seriously ill or injured. Her latest concerns a woman who got stuck with a $36,000 bill when her fixed indemnity plan covered only a small fraction of the tab for surgery after she broke her wrist and back (!) -- (the latter doesn't seem to have caused lasting damage):

Martin thought she’d bought a comprehensive health insurance plan through the government-regulated Affordable Care Act marketplace, healthcare.gov. But she really visited a website cunningly crafted to look like an ACA portal, which put her in contact by phone with a salesman. He sold her plan that turned out to offer only minimal coverage, and when Martin needed help, his number was disconnected.

The larger point is that since the Trump administration changed the rules to enable so called short-term, limited duration (STLD) plans to extend plan terms to up to a year, and touted them as a cheap alternative to ACA-compliant plans, deceptive marketing for such plans has exploded. Robocalls, websites meant to snare people seeking HealthCare.gov (with help from Google ads), and hard-sell-quick-sell phone techniques are well chronicled by Gantz.

Louise Norris, a broker of individual market insurance who puts her clients' interests first (and has compiled a virtual encyclopedia on the subject at healthinsurance.org), acknowledges that there is a role for STLD plans, and that not all of them are terrible. But the market is honeycombed with coverage traps.  In fact, Louise helped me, and someone I was helping, avoid perhaps the subtlest of snares in the STLD market.