New Rules to Limit Duration of Short-term Coverage Make It Too Short-term!

The Biden administration recently announced final regulations which limit the sale of short-term coverage (in the states which allow its sale) from several years to three or four months. The title of the CMS press release is Biden-Harris Administration Protects Consumers from Low-Quality Coverage by Limiting “Junk” Health Plans.

This decision has more to do with forcing people into the Affordable Care Act Marketplace for coverage than protecting Americans and lowering costs (as the press release suggests). We understand that objective because the purpose of insurance is to spread the risk over a larger population. We would always rather see an individual choose coverage regulated by the Affordable Care Act rather than short-term coverage.

However, the administration’s pronouncement doesn’t acknowledge the serious deficiencies of marketplace plans and rules, especially for those who won’t qualify for any subsidy, and the practical reality that if you miss an open enrollment deadline, you may be uninsured until the next period which can be nearly a year away.

Let’s discuss these two points.

First, for Americans who are not eligible for a subsidy, especially older Americans in states where premiums are age-rated, premiums can be unaffordable. Let’s look at some actual options for a silver plan, a typical choice of more comprehensive coverage than catastrophic but a higher deductible than a gold plan for a 60-year-old who chooses Anthem coverage in Connecticut:

This year if one purchased Marketplace coverage, premiums are limited to 8.5% of income for the benchmark silver plan but that protection is expiring at the end of next year. Deductibles are trending upward along with premiums and although well care is covered by the premium payment, one has a good deal of financial exposure with most plans to meet the deductible for any services other than well care. And in many areas, the provider networks associated with ACA-compliant plans are narrow networks that disappoint many consumers.

Second, our system is complex and confusing and those losing group coverage for the first time or facing the end of COBRA, are often ill-equipped to understand the bureaucracy associated with the purchase of individual coverage. They miss an enrollment window and are stunned to realize they will remain uninsured until the next open enrollment period.

Again, we are not enthusiasts of short-term coverage. Pre-existing conditions are taken into account with these products and significant claims are often disputed. But short-term coverage is certainly superior to Christian Co-op coverage which the government continues to allow and, by the way, isn’t insurance. At least short-term plans, where they are sold, are regulated by state insurance departments.

We know these rules will be revisited because every recent Administration has done so. We’d prefer at least a twelve-month rather than a four-month period where an individual or family could have this coverage in order to educate themselves and prepare for the next annual open enrollment cycle.