Short-Term Health Plans Expanding, But Not in California

In February, the Trump administration released its long-awaited proposal on the expansion of short-term health insurance plans that do not have to comply with all of the Affordable Care Act (ACA) requirements. The White House says it wants to increase the availability of short-term plans to give more options to those who buy health plans on their own because they lack access to employer-sponsored coverage, are self-employed, are unemployed, or may be between jobs.

However, critics say expanding the availability of short-term health plans could make it more attractive for those who are younger and healthier to drop out of ACA-compliant plans. That could further drive up premiums for ACA plans in the future. Opponents are also critical of short-term health plans because they say that while the plans may cost less, they also cover less; that could leave patients with a short-term plan responsible for substantial out-of-pocket expenses if they develop future health problems.

“Short-term plans, with their skimpy coverage and lower price, are likely to siphon off healthier people from the market,” AARP said in a March 21 statement. “This means that older people and those with greater health needs who remain in the individual health insurance market will have to pay more for their coverage.”

Kaiser Health News reported last month that federal health officials estimate as many as 200,000 people now covered by ACA-compliant plans could move to the proposed short-term plans. Analysts predict a higher number of converts. Under the proposed rule, insurers could begin to sell plans that offer coverage for up to 364 days. In many states, short-term plans are limited to 90 days or less and they cannot be renewed; California currently limits consumers to six months of short-term coverage.

Short-term health plans are typically not guarantee issue. Most require answers to a series of medical questions, and insurance companies often can reject an applicant with a pre-existing medical condition or charge him or her more for coverage – something not permitted by ACA-compliant plans (and prohibited in some states). Rates for ACA plans are based only on an insured’s age, location, and tobacco use, but the same often does not apply to short-term plans. Many short-term plans also exclude benefits for maternity care, preventive health, prescription drugs, mental health services, and substance abuse treatment.

AARP believes the expansion of short-term plans poses a significant challenge to older Americans. That’s because 40 percent of those 50 to 64 years old have a pre-existing health condition. Short-term health plans are not required to adhere to the ACA age-rating protections, which limit the ability of insurers to charge older adults more. So, older people could face premiums that are more than three times the rates charged to younger enrollees or they could be denied coverage based on age.

In their call with reporters discussing the proposed rule change, officials at the Centers for Medicare and Medicaid Services (CMS) said they were seeking comment on whether there may be a way to guarantee renewability of short-term plans – something currently prohibited. The public comment period ends on April 23, 2018.

The proposed expansion of short-term health plans for up to one year is likely moot in California. The U.S. Department of Health & Human Services says the proposed federal law will allow states to continue to apply their own regulations on these plans; that means the existing coverage limit of six months in California would continue in effect.

That is, unless legislation introduced by California State Senate Health Committee Chair Sen. Ed Hernandez (D-West Covina) moves forward. His proposed bill (S. B. 910) would prohibit the sale of short-term health plans altogether in California starting January 1, 2019. The measure, amended in the State Senate on March 14, is scheduled for review next by the Senate appropriations committee.

We will continue to monitor the proposed changes, at both the federal and state levels, and will share news when it’s available on the impact on brokers and those you serve.