Five months after regulations curbed short-term, limited-duration health plans to four months maximum, their future is once again in flux.
Several US representatives introduced a bill on Jan. 10 that, if passed, would undo last year’s changes, reverting the maximum coverage period back to a 36-month limit enacted during the first Trump administration.The bill would also revoke a requirement for payers to provide disclaimers saying that these plans are not comprehensive coverage.
The plans were originally designed to fill gaps in coverage—like when someone transitions between employers—and generally receive a special carve-out from minimum coverage requirements because they don’t qualify as “individual health insurance coverage” under the Public Health Service Act, according to the Centers for Medicare and Medicaid Services.
The quality of these plans varies dramatically, and consumers often end up with expensive consequences, experts told Healthcare Brew.
“These plans really create financial barriers to people getting care that they need to stay healthy,” Molly Smith, group VP of public policy at the industry’s largest trade group, the American Hospital Association, told Healthcare Brew.
Back to the future
Some states have their own limits on short-term, limited-duration plans, ranging from banning them altogether to imposing time limits below the federal cutoff.
When federal regulations first defined them in 1997, short-term plans weren’t subject to rules except one: People couldn’t be on them for more than 12 months.
The Obama administration shrank that limit to three months, effective in 2016. Then the Trump administration stretched it to three years in August 2018 by allowing the plans to last 12 months for an initial period and be renewed for up to 36 in total, according to an August release.
The Biden administration retracted the limit to four months total for any plans sold after Sept. 1, 2024.
A federal register document from last April cited an Illinois man who was diagnosed with Stage IV cancer a month after enrolling in a short-term plan. His cancer was deemed a pre-existing condition, leaving him on the hook for $800,000 of medical debt.
“For the people who are getting the skimpier short-term plans, I think there is good reason to be concerned that they’re not adequately protected against the financial risk associated with getting sick,” Matthew Fiedler, a senior fellow with the Center on Health Policy at nonprofit research organization Brookings Institution, told Healthcare Brew.
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But there’s no guarantee Biden’s resolution will stick.
“I would expect the second Trump administration to go back to the first Trump administration’s rule,” Fiedler said.
Uncertain consequences
While Trump has not mentioned these health insurance alternatives during his campaign or his first few weeks in office, under his last term, business for these short-term plans boomed. The White House did not respond to a request for comment.
A 2020 Democratic Committee staff’s oversight investigation found an increase of over 600,000 patients enrolled in short-term, limited-duration plans after Trump relaxed regulations, from 2.36 million in 2018 to about 3 million consumers in 2019.
The plans’ supporters argue these non-ACA regulated plans, through individual underwriting, can offer healthier people cheaper premiums and get more people insured. This is a similar argument for other insurance alternatives, like farm bureau plans.
“The Biden administration’s rule limiting Americans’ healthcare choices is misguided and costly,” Congressman Vern Buchanan (R-FL), one of the House members trying to repeal the limitations, said in a statement on Jan. 15.
The 2020 congressional oversight report found, however, that though these plans can offer cheaper premiums, their sometimes “bare bones” coverage may contribute to higher out-of-pocket expenses when patients fall ill.
A 2020 report by Milliman, a health benefits consulting firm, had a similar conclusion, calculating that someone with lymphoma may pay $16,800 more in out-of-pocket expenses over six months with this kind of plan than with an ACA-protected one, for instance.
Smith told Healthcare Brew that hospitals are taking financial losses because they are absorbing unexpected costs from people on these short-term plans.
“They are increasingly putting financial assistance toward individuals who supposedly have coverage, but who have cost-sharing obligations that they can’t pay,” Smith said.
At the same time, a limited plan is better than no plan.
Fiedler added that there may be more demand for these plans if and when the currently expanded ACA marketplace subsidies expire at the end of 2025.
“Once you go back to the base ACA subsidies, there are going to be a lot more people for whom they could get a lower premium by going with a short-term plan,” Fiedler said.