Bill to Ban Short-Term Health Plans Awaits Action by Gov. Brown


Highlights/Key Takeaways

·         Short-term health plans that do not comply with the Affordable Care Act could be prohibited in California in 2019 under legislation sent to Governor Brown.

·         California’s action mirrors short-term plan limitations or prohibitions by other states.

·         Governor Jerry Brown has until September 30, 2018, to sign or veto the proposed legislation.


Members of the California State Assembly and State Senate have voted to ban the sale of short-term health insurance plans in 2019. The Senate approved S.B. 910 on August 21 after the Assembly voted to approve the measure on August 16. The legislation authored by State Sen. Ed Hernandez (D-West Covina) is now pending review by Governor Jerry Brown.


Short-term health plans do not have to include all of the “essential health benefits” of plans compliant with the Affordable Care Act (ACA). They can exclude maternity care and prescription drug coverage, among other benefits. Applicants for short-term plans can be denied coverage if they have pre-existing health conditions. That is one reason many critics, including Sen. Hernandez, describe short-term health plans as “junk insurance.” He has said these plans give people a false sense of security and could burden individuals and families with high, unpaid health care bills.


Under the legislation, the sale of non-ACA-compliant short-term health plans in California would be prohibited; Californians could still purchase limited-term health policies in 2019 if they include the ACA’s current benefits and consumer protections.


President Trump announced last year a plan to expand the coverage period for short-term health insurance. Updated federal guidelines released in August extend coverage to 12 months, but the new rules also permit insurers to renew plans for up to 36 months. States can regulate the sale of short-term plans, which the California legislature has opted to do.


Previously, California long limited short-term health plans to six months. Under the Obama administration, the coverage period was cut to three months. As of year-end 2017, fewer than 10,000 short-term health policies were in force in California, according to the state Department of Insurance.


With that in mind, the impact of the proposed ban could be minimal for brokers and consumers, although it’s not known if the broader federal rules would have boosted short-term health plan sales in California.


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