Hoping to Improve ACA Risk Pools, HHS Proposes Way to Curb Use of Short-Term Plans

The Department of Health and Human Services is proposing a way to curb abuse of short-term health insurance plans as a way of strengthening the risk pools of insurance plans offered on the federal exchanges.

The department proposed a rule Wednesday that would clarify that short-term insurance policies can only be offered for less than three months and cannot be renewed after that time period. The department also announced it will propose a separate rule later this year that would include an adjustment factor for partial-year enrollees as part of the risk adjustment model beginning next January. A third proposed rule the department says is coming this year would include prescription drug utilization data into the risk adjustment model starting during the 2018 benefit year.

Such proposed rules would ensure consumers are using temporary insurance plans for when they are intended, typically when someone is in the middle of a transition in their life that would affect their existing coverage, HHS said in a release explaining the rules.

Insurers aren’t obligated to cover all the benefits that are required under the Affordable Care Act for short-term insurance plans, but loopholes allow some people to stay on them for longer periods of time than intended, and that can mean they’re not part of the exchange risk pools.

Officials want more healthy individuals to purchase insurance on the exchanges to help drive down the risk pools and keep costs low. When the Affordable Care Act was implemented, people with pre-existing conditions that hadn’t previously had access to health care used the plans and drove up costs. Now, officials aim to put downward pressure on prices and trying to get younger and healthier individuals in the risk pool.

Additionally, the department will increase outreach to 65-year-olds about signing up for Medicare and ending their marketplace plans if they choose. The department will also implement new rules for special enrollment periods later this month.

HHS Secretary Sylvia Burwell first announced the effort during a Facebook Live interview with the New York Times editorial board.

“This is a loophole, and it’s a loophole about a design that’s important,” Burwell said. “That limited coverage should be limited. It is for someone making a transition and knowing they’re making a transition and only for three months.”

The announcement is the first of three coming from HHS this month about strengthening the marketplaces, and comes as the department is taking steps to keep insurers engaged with the marketplaces. Burwell said during the interview that five major insurers have talked about their confidence in the exchanges, although UnitedHealth, the nation’s largest insurer, is pulling out of most state markets before the fourth open enrollment period starts in November.

“I think that’s important, and I think the number of consumers in the marketplace is important,” she said. “But we take considerations and concerns that are articulated very seriously.”

Other announcements coming this month will be about working with insurers and state insurance departments about improving coverage options and improving outreach to young adults and uninsured families, the department says.