HHS Loosens Restrictions on Short-Term Health Plans

A final rule issued by the U.S. Department of Health and Human Services (HHS) allows insurers to once again sell short-term health insurance for up to 12 months, as well as makes the plans renewable for up to three years. The rule overturns an Obama administration directive that limited these plans to 90 days. Short-term plans differ from other Affordable Care Act (ACA) plans because they can bar people with preexisting health conditions, limit coverage, set annual and lifetime caps on benefits, and cover fewer prescription drugs. Most exclude benefits for maternity care, preventive care, mental health services or substance abuse treatment.

Administration officials estimate shortterm plan premiums could be half the cost of the more comprehensive ACA plans, and predict approximately 600,000 people will enroll in the plans in 2019, with 100,000 to 200,000 of those dropping ACA coverage to do so. Just over 14 million people are enrolled in ACA plans this year. According to a recent Congressional Budget Office (CBO) report, premiums for the average benchmark ACA plan rose by 34 percent in 2018. Factors driving the increase include medical inflation, but CBO also cited the administration’s decision last fall to drop payments to insurers for lowering deductibles for certain low-income policyholders. The same report expects premiums for ACA plans to increase 15 percent in 2019, partly due to consumers being less likely to purchase coverage without the threat of a tax penalty.