The Biden Administration finalized a rule on March 28th that will force hundreds of thousands of Americans to lose their healthcare coverage, leaving them uninsured until they can enroll in an Obamacare plan that is more than double the cost.
The Center for Medicare and Medicaid Services defines short-term limited duration plans (STLDP) as “a type of health insurance that is designed to fill temporary gaps in coverage when an individual is transitioning from one source of coverage to another.” These plans are exempt from federal health insurance regulations which means they can discriminate based on health status, have exclusions for preexisting conditions, and set yearly and lifetime spending limits. While some consumers need these protections, being exempt allows these plans to be flexible and much more affordable for thousands of Americans who would otherwise have no health coverage.
The current federal rules allow for STLDPs to offer up to 12 months of coverage that can be renewed twice for a maximum of 36 months of continuous coverage. In Wisconsin, initial plans can also be up to 12 months, however, they can only be renewed for a maximum of 18 months of continuous coverage. According to a report from the Office of the Commissioner of Insurance (OCI), there were 10,310 people in Wisconsin on an STLDP in 2021, most of whom were between the ages of 55-65 and who reside in the Northeastern and Southeastern regions of the state.
When the Affordable Care Act was implemented in 2010, many people used STLDPs as an affordable alternative to the Affordable Care Act (ACA) or Obamacare plans. In Wisconsin, STLDP average monthly premiums were $157 in 2021. That same year, the average monthly premium for the lowest-cost bronze plan in Wisconsin was $338—making them less than half the cost.
In response to people choosing short-term plans, the Obama Administration restricted STLDP’s to a maximum coverage of three months with no renewals, effectively forcing people to pick ACA plans that were more expensive. The Trump Administration reversed this and allowed coverage up to three years in 2018. This has now been reversed once again. The new rule will take affect 75 days after the finalization on June 11th.
Restricting STLDPs not only forces people on to higher cost plans, but it also leaves them uninsured for up to eight months. There is a slim open enrollment period for ACA coverage between November 1st and January 15th. Say you find yourself in need of a new coverage plan on February 1st. You could apply for an STLDP and start coverage right away for four months, losing your coverage by June 1st. Then you would have to wait to apply for an ACA plan that would not start until January or February of the following year—leaving you completely vulnerable until then. For example, Jeanne Balvin faced 97,000 in medical bills after her short-term plan expired in June of 2017.
This is a clearly harmful policy for Americans who may find themselves needing coverage outside of the ACA enrollment window, so how is this being justified?
- The administration claims that getting more people on the insurance marketplace by restricting STDLPs will lower gross monthly premiums by 0.5% and reduce federal spending by $120 million per year. However, the cost of the program is not actually reduced by that amount. Rather, it will be covered by higher premiums for the healthier individuals forced onto the marketplace instead of the federal government taxing or borrowing that amount.
- Short-term plans are often painted as “junk” plans because they do not have to provide comprehensive coverage for clients with preexisting conditions, and many may pick these plans without fully understanding the risks. The administration claims that this rule will more clearly distinguish STLDPs and Obamacare plans. But rather than implement rules to ensure that all necessary information is shared, they are taking away an option that can and does work for hundreds of thousands of people.
Truthfully, many STLDPs compete with Obamacare plans, and they don’t want people to pick another option. According to the Congressional Budget Office (CBO) 95 percent of short-term plans are a “comprehensive major medical policy that, at a minimum, covers high‐ cost medical events and various services, including those provided by physicians and hospitals” under the current rules. Additionally, the OCI report found that “nearly all STLDPs cover prescription drugs and cancer treatment” in Wisconsin. It is important that people understand the plan and benefits they sign up for, but people should be able to pick the best coverage for them at a price they can afford.
STLDPs have served as a flexible and affordable option for individuals transitioning between health insurance plans, and the new rule will have far-reaching and potentially harmful consequences. Ultimately, healthcare policy should prioritize affordability, accessibility, and informed choice, ensuring that individuals can select the coverage that best meets their needs.