More on “Short-Term, Limited-Duration” Plans
As reported in the August 2 Update, the administration issued a final rule on August 1 to permit insurers to sell on “short-term, limited-duration” insurance (STLDI) plans that are effective for up to one year and are renewable up to three years, a much longer period than previous regulations permitted. Such plans are not required to offer the same “essential health benefits” as plans meeting the standards of the Affordable Care Act (ACA), can impose annual and lifetime benefit limits, and can be denied to people with pre-existing conditions. Therefore, they are less expensive than ACA-compliance plans and so may be attractive to younger, healthier consumers, thus increasing the cost of the ACA-compliant plans available to those with pre-existing conditions. Experts, including insurance companies, warn that people with STLDI plans may find that they do not have the coverage they need should they become sick or injured, and they may not understand that generally they cannot switch to more robust plans outside the annual open enrollment period. See Slow Rollout, More Fine Print with Trump Health Care Options (Washington Post, 8/5/18). The federal rule does not preclude states from regulating or banning the sale of short-term plans. See California Close To Banning Sale Of Short-Term Health Plans (LA Times, 8/2/18). For a good summary of the rule and explanation of state regulatory options see Lower-Cost, Short-Term Insurance Plan Approved, But at What Cost to State Markets and Consumers? (State Health Policy Blog, National Academy for State Health Policy, 8/7/18).
New Guidance Encourages States to Allow Non-“Loaded” Off-Marketplace Plans
On August 3, the Centers for Medicare and Medicaid Services (CMS) issued an Insurance Standards Bulletin titled Offering of Plans That Are Not QHPs without CSR “Loading.” As explained in a post from the Health Affairs blog, the purpose of this guidance to encourage state regulators to permit their health insurance Exchanges to offer non-“loaded” individual-market plans outside the Exchange in order to keep premium prices down in that market.
Background. In late 2017, the administration ceased making “cost-reduction subsidy” (CSR) payments to subsidize insurers for selling plans with lower cost-sharing than would otherwise apply to a plan with that level of benefits. In response, regulators in many states permitted insurers to increase premiums for health plans sold on the state’s Exchange (Marketplace) to make up for the loss of the CSR payments. This practice is called “loading.” In some states, premium increases were applied to all Exchange plans (“broad loading”). In others, only the “silver-tier” plans were “loaded.” The premiums of silver plans in particular were increased because premium tax credits are based on the second lowest-cost silver plan in a market. As a result, consumers eligible for tax credits were not hurt by the increased cost of those plans. However, consumers purchasing outside of the Exchange, and therefore not receiving a tax credit, were harmed by the higher prices of the non-Exchange “loaded” plans. The new guidance is intended to help these consumers.