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HHS Seeks To Alter Short-Term Health Plans

HHS Alters Short-Term Health Plans Regulations
Short-Term health plans are designed to fill brief gaps in health coverage. Generally, they are often used by people who are between jobs or need a temporary solution until they can get a standard health plan. However, these plans have recently come under scrutiny. The Department of Human & Health Services (HHS) published a proposal to alter specific regulations on short-term health plans which focus on improving the risk pools.

Currently, short-term plans (STP) are not subject to any of the rules enforced by the ACA. For example, STPs can be priced based on an individual's health status. Carriers can deny coverage for pre-existing conditions. In addition, STPs do not have to cover 'Essential Health Benefits', such as maternity and prescription drug coverage. Lastly, insurers have the ability to limit the maximum amount the plan will pay. All of these practices are illegal under the Patient Protection & Affordability Care Act (PPACA).

Short-term plans are generally purchased by young, healthy people because the plans are less expensive than ACA compliant plans. Additionally, plans are currently available with coverage terms up to 12 months. So even though short-term plans offer less comprehensive coverage than ACA plans, it is still a way for individuals to cover an unforeseen medical need at a cheaper price. Furthermore, people can renew these plans at the end of the term removing any concern of having a lapse in coverage.

What Regulations Does HHS Want To Alter?

The Department of Labor, Department of Treasury, and Department of Health and Human Services (HHS) issued a proposed rule to revise the definition of short-term coverage. Under the new regulations, short-term health plans:

  • may only be offered for three months or less,
  • cannot be renewed at the end of the three month period, and
  • insurers must provide notice to consumers that short-term coverage is not minimum essential coverage, therefore, the consumer will still owe a tax penalty.

Stability of the Risk Pool

Short-term health plans appeal to mainly young and healthy individuals. HHS' proposal to integrate these regulations could be key in limiting the use of short-term plans and attracting this demographic to insurance marketplaces. With affordability a top priority for consumers, the influx of these healthy consumers may help offset the risk added by the sick and elderly. The result can potentially mean lower premiums for everyone on the exchanges.

Other HHS Focus Areas

Maturing the Risk Adjustment Program

The objective is to reduce incentives for insurers to design products that attract a disproportionately healthy risk pool. Risk adjustment allows them to design products that meet the needs of all consumers.

Transitioning Consumers to Medicare

The objective is to enhance senior programs to ensure consumers understand the steps required to transition to Medicare.

Implementing the Special Enrollment Confirmation Process

In order to get coverage outside of open enrollment, consumers will need to have experienced a 'Qualifying Life Event (QLE)', such as the birth of a child. In order to be eligible for a 'Special Enrollment Period', consumers will be asked to provide significant documentation to prove eligibility, such as a birth certificate in the example above.

Reducing the Impact of Data Matching Issues

To ensure access to coverage and financial assistance are limited to individuals who are indeed eligible. Additionally, prevent the loss of coverage or financial assistance through the Marketplace due to difficulty navigating the data matching process.