HHS proposes 3-month limit on short-term plans to strengthen ACA risk pool

A proposed rule from HHS would limit short-term individual health plans to three months without a chance to renew in an effort to keep healthier enrollees from leaving the Affordable Care Act’s (ACA) health insurance marketplaces and limit the upward trend of exchange premiums.

The announcement from HHS, one of three set for June on ACA policy, also proposes changes to the ACA’s risk adjustment program, contacting people ahead of their Medicare eligibility date and implementing a full confirmation process for customers looking to buy exchange plans outside of open enrollment.

Short-term insurance plans have reportedly become more popular since the exchanges opened in 2013, despite the fact these policies don’t cover what the ACA considers to be essential benefits, like prescription drugs, and may reject applicants based on preexisting conditions.

HHS said these plans were intended to fill short gaps in coverage, not serve as a long-term alternative to buying insurance on the exchanges.

“Some issuers are now offering short-term limited duration plans to consumers as their primary form of health coverage for periods that last nearly 12 months, allowing them to target only the healthiest consumers while avoiding consumer protections,” HHS said in a statement. “By keeping these consumers out of the ACA single risk pool, such abuses of limited duration coverage increase costs for everyone else, and they could have a greater impact over time if allowed to become more widespread.”  

Along with limiting plans to three months and barring renewal, the proposed rule would require insurers offering short-term coverage to disclose to customers that these plans don’t meet the ACA’s minimum coverage standards, and they may be on the hook for the same tax penalties as someone without any insurance.

Getting those customers who used short-term plans to fill coverage gaps to use the marketplaces instead will change risk-adjustment models as well. Beginning in 2017, the model will account for enrollees who only want coverage for part of the year after a major life change.

The changes aren’t all about driving more customers to the exchanges. In an attempt to crack down on potential abuses of special enrollment periods, HHS will begin requiring enrollees to provide documentation proving they’re eligible to buy coverage outside of the open enrollment period.