Bring back short-term health insurance plans — it’s only fair

Last October President Trump issued an executive order intended to increase choices for consumers who purchase their health insurance in the individual market and for whom the Patient Protection and Affordable Care Act (PPACA) locked them into expensive, government dictated, one size fits all plans. In response to the presidential directive entitled “Promoting Healthcare Choice and Competition Across the United States,” the Secretaries of the Departments of Treasury, Labor, and Health and Human Services in February issued a proposed rule that would restore the maximum permitted period of short-term, limited-duration insurance (STLDI) to its historical length of 12 months. The 60-day public comment period closed on April 23. The Agencies should now finalize this rule. The designation of short-term, limited-duration insurance refers to health insurance products that cover a wide range of inpatient and outpatient medical expenses. However, in contrast to other types of comprehensive major medical policies, STLDI plans have fixed terms. In addition, STLDI coverage may be centered on problems most likely to arise in its purchasers.

STLDI played a vital role in the individual health insurance marketplace for nearly 20 years. Many of these plans provided excellent value to consumers, especially those who were between jobs or self-employed. Following full implementation of the PPACA in 2014, STLDI became a cost-effective solution for individuals who missed open enrollment periodslacked the resources to continue employer-sponsored insurance under the Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA); were ineligible for PPACA premium tax credits; or could not afford the extremely expensive, low-value plans available on the PPACA exchanges. In addition, short-term, limited-duration insurance became the only way many individuals who travel frequently could maintain full coverage outside their local areas. STLDI’s major advantage has been exclusion from the legal definition of “individual health insurance coverage,” rendering it exempt from the PPACA’s essential benefits and other costly mandates. However, in 2016 the Obama Administration shortened the longstanding allowable length of STLDI policies from 12 to 3 months. This regulatory restriction curtailed the usefulness of STLDI plans, severely disadvantaging millions of patients and consumers in the process. Many medical, insurance, and left-of-center groups oppose the return of STLDI terms to terms to their historical length. On the one hand, these commercial interests mistakenly believe the shorter limit will force people to buy much more expensive PPACA policies, while political opponents see STLDI as a threat to the survival of the PPACA. However, despite the misleading claims of STLDI detractors, many of these policies provide affordable, high-quality coverage. The country’s largest health insurer, UnitedHealthCare, offers STLDI with a broad range of deductible and copay options that can be easily purchased on the internet. For those who travel frequently, United’s STLDI plans include the benefit of access to its large national network of well-regarded physicians, hospitals and other providers. STLDI is often very reasonably priced, and for many consumers is a preferable option to similarly PPACA excluded “shared ministry plans” to which they would otherwise turn, or to no coverage at all. Opponents of extending the permissible term of STLDI are really arguing that the federal government should coerce self-employed individuals, small business people, and the unemployed to purchase grossly overpriced health insurance to force them to subsidize the care of others, heedless of their constrained ability to pay for exchange-listed plans, their many deficiencies and limited availability, and individuals’ preferences or needs. Shortening the allowable term of STLDI plans to 3 months was a regulatory overreach that jeopardized the financial security of the millions of people those who must rely on them. As a result of this harmful move, deductibles and co-payments to reset each quarter, significantly increasing costs for patients who accrue sizable medical expenditures during the 3-month period. More important, it exposed consumers who experience illness to the risk that they will not be able to obtain coverage in subsequent quarters, raising the specter of prolonged uninsured periods during which they could incur hundreds of thousands of dollars in medical bills. Given the small number of insurance options on many exchanges, the lack of coverage for individuals who travel, and the exorbitant cost of PPACA-dictated policies, insurers should be permitted to offer 12-month STLDI insurance policies to those who need them. Further, regulators should not prevent insurers from offering renewable STLDI. Although the law excludes STLDI from the definition of individual health insurance coverage, it does not define the phrase. Instead, rightly or wrongly, Congress delegated broad authority to draw the line between STLDI and individual health insurance coverage to relevant federal agencies. From the phraseology of the legislation, it is clear that Congress intended for the agencies to have maximal flexibility in defining and promulgating rules to meet current exigencies. To distinguish individual health insurance coverage from STLDI, the agencies merely need to set requite contract terms for each type of insurance, while avoiding overlap or ambiguity, and to do so in reasonable manner. Allowing insurance companies to offer consumers renewable, 12-month short-term limited duration health insurance contracts is not only reasonable, it is the proper and morally correct policy to pursue. Roger Klein J.D., M.D. is a member of the Regulatory Transparency Project’s FDA and Health Working Group. He is a former advisor to the FDA and HHS. Dr. Klein graduated from Yale Law School and completed his postgraduate medical training at Yale Medical School.