Rule Change for Short-Term Insurance Plans

Update on Proposed Rule Change for Short-Term Insurance Plans

August 2, 2018

On Wednesday, August 1, 2018, the Trump Administration laid out its final rule for short-term, limited-duration, insurance plans. The American College Health Association has opposed this proposed change since it was announced last October and commented against the proposed rule in April of this year (see below). ACHA harbors concerns that this change will undermine the strength and quality of student health insurance plans while siphoning healthy students onto other plans and raising premiums for others.

The final rules state that these plans (which under the current rule issued by the Obama Administration can last no longer than 3 months) may last up to 12 months and may be renewed to a maximum consecutive coverage length of 36 months. The rules do not prohibit consumers from purchasing concurrent plans that run consecutively with each other, thus allowing a consumer to string short term, limited duration, plans together indefinitely. These plans are not required to provide essential health benefits, maintain the preexisting condition ban, or have prohibitions on lifetime/annual limits. The rules also explicitly state that the states are free to impose shorter maximums.

The final rule also contains several direct mentions of student health insurance coverage. Specifically, the rule explicitly states that short-term, limited-duration insurance cannot be “student health insurance coverage” because it is by definition not individual health insurance coverage. That said, issuers may sell short-term, limited-duration insurance to students in institutions of higher education to the extent permitted by state law. The rule also allows institutions to determine if they would like to require their students to either purchase “student health insurance coverage” or a type of coverage other than short-term, limited duration insurance. Thus, the extent to which these plans might directly compete with student health insurance plans is now up to the individual states. An economic analysis states that the Administration believes that potential losses to the student insurance pool as a result of these plans will be limited. The Administration also believes that notice requirements will clarify that these plans may not provide the full range of ACA-required benefits and consumer protections.

ACHA Comments on Proposed Rule Change for Short-Term Insurance Plans

April 26, 2018

Earlier this year the Trump Administration announced its intention to change the definition of "short-term, limited duration, insurance plans" from its current three-month maximum to a new twelve-month maximum with the ability to renew these plans year after year. A number of federal agencies issued a comment solicitation in response to the proposed rule change. With major concerns about this change's impact on student coverage and the stability of insurance, including student health insurance plans, ACHA's national office, executive committee, and Student Health Insurance Coalition formulated and formally submitted the following comment in response to that solicitation:

The American College Health Association (ACHA) has considerable concern regarding the agencies’ return to a 12-month definition for short-term, limited duration, insurance plans. As the leading advocate for the health and well-being of the nation’s college students, we believe that this proposed rule will further erode consumer protections for young Americans, many of who include the nation’s 19 million college students.

Historically, these plans provide minimal coverage and benefits to their consumers. In the “costs and transfers” section of the rule solicitation, the agencies’ admit that these plans are unlikely to include all of the elements of Affordable Care Act-compliant plans including pre-existing condition prohibitions, coverage of essential benefits with annual or lifetime dollar limits, preventative care, maternity, and prescription drug coverage. Estimated cost savings indicated in the solicitation fail to factor in potential additional costs. Contrary to popular belief, young adults are coming onto campus with a variety of unique medical needs and robust coverage is necessary to secure timely treatment and encourage academic success. Comprehensive preventative care and continuity of coverage are essential to students to tackle potentially chronic issues early in their life. Early intervention helps to prevent the higher costs of care often seen later in life by unmanaged chronic conditions at an earlier age.

The comment solicitation indicates that 100,000 to 200,000 individual exchange enrollees could leave in favor of these short-term plans. ACHA believes that this projection underestimates the number of insured who would switch to these short-term plans. These numbers do not take into account non-ACA exchange plans such as student health insurance plans. A recent study notes that this proposed rule could decrease enrollment in ACA-compliant individual plans by up to 15 percent, or two million individuals. ACHA is concerned that some students may forego the comprehensive coverage available through their campus plan in favor of lower cost, short-term plans that fail to provide adequate coverage. This rule would therefore have a disproportionate impact on college students. Losses in the insurance pool for these student health insurance plans would cause premiums to rise for those students that choose to stay, or need to stay, on their campus’ student health insurance plan. Such action would also place considerable stress on the institution’s student health and wellness department.

Lastly, we express concern regarding our member universities’ “fully-insured” student health insurance plans. Under the ACA, these plans are required to meet all minimum essential benefits. Without a specific exemption, or reclassification, these plans will struggle to survive the unintended financial burden this new rule would impose. Approximately 60 percent of institutions offer a fully-insured student health insurance plan. The proposed rule change threatens student access to existing affordable insurance that provides robust coverage.  ACHA urges the agencies to maintain the maximum duration of short term, limited duration plans at three months to avoid further uncertainty and instability in the marketplaces and prevent significant immediate and future health risks for our nation’s college students. If the agencies opt to pursue a return to the 12-month maximum, it should ensure that short-term duration plans have to comply with ACA protections, including coverage of essential benefits.