New Short-term Insurance Reforms Will Mean More Choices for Consumers

The Departments of Health and Human Services (HHS), Labor (DOL), and Treasury (DOT) issued a final rule on short-term, limited-duration health plans that would bring more affordable health coverage options to consumers.

Under the rule, consumers can purchase plans that cover a maximum initial period of less than twelve months, which is much longer than the previous three-month maximum period. The plans can also be renewed for up to 36 months. The type of health insurance coverage under consideration is designed to cover people who are transitioning between different plans and middle-class families that don’t qualify for subsidized insurance plans.

Short-term, limited-duration insurance is not subject to federal requirements for health insurance sold in the individual market. As a result, it is exempt from providing essential health benefits, prohibitions on preexisting condition exclusion, guaranteed availability and guaranteed renewability, making it desirable for families that are forced to pay expensive premiums under the Affordable Care Act (ACA).

Expanding access to those plans brings relief to people struggling with limited choices and high rates because short-term, limited-duration insurance is significantly cheaper than plans compliant with the ACA. For example, a person would have paid $124 per month for a short-term, limited-duration policy compared to $393 for an unsubsidized individual market plan in the fourth quarter of 2016. According to a senior official at the HHS, short-term, limited duration health plans are estimated to be 50 to 80 percent cheaper than the ACA plans.

To clarify, short-term, limited-duration insurance is not a replacement for Obamacare. It simply makes an option available to people who are abandoned by the current system while the ACA plans still remain in place.

Although these insurance plans are not a silver bullet for everyone, expansion provides an alternative plan for people without comprehensive health insurance coverage who would otherwise be uninsured.

The new rule is fulfilling President Trump’s promise to increase affordable health insurance options. Congress needs to follow the lead of the administration by delivering more feasible options to people who have been priced out of the existing plans.