Rising costs for health insurance under the Affordable Care Act have left many Americans searching for low-cost alternatives. In states where health insurance has become cost-prohibitive, short-term health insurance plans have grown in popularity. Recent government legislation may propel those trends even further, as President Donald Trump signed an executive order last October which changed important aspects of these health plans. Specifically, buyers of individual plans that are unable to purchase ACA-compliant insurance will be able to extend the average duration for short-term health program alternatives.
The availability of short-term health insurance still varies by U.S. state and patients should research availabilities before selecting a provider. Some geographical jurisdictions have tighter restrictions than others, and this can complicate the process of finding suitable coverage.
However, the federal regulations currently in place have enacted changes in the initial duration of short-term insurance programs. Overall, the added flexibility created by these rule changes may lead to significant increases in the popularity of short-term health insurance options and influence labor market trends in the healthcare industry. In this article, we will look at three important rule changes that have been enacted as a result of this recent legislation.
Initial Term Limits Increased to 364 days
Under the recent rule change, the first important difference is that initial term limits for short-term insurance plans have been extended to 364 days. In 2017, the Obama Administration imposed restrictions on short-term health insurance programs which limited potential durations to 90 days.
Under the ACA rules, short-term health insurance programs were always considered exempt. However, the 2017 rule changes reduced the time availabilities that could be offered to patients and reversed long-standing regulations that enabled short-term health insurance to be purchased for 364 day periods. The 2018 legislation under the Trump administration essentially removed these restrictions and reverted the system to the guidelines in place prior to 2017.
Short-term Plans Can Be Renewed (Up to 36 months)
In addition to these extensions, the legislation also allows short-term health insurance plans to be considered renewable. The second significant change to these programs is that short-term health insurance plans can be renewed up to a period of 36 months. At this stage, individuals would then be able to purchase another short-term health insurance plan (either from the same insurance company or from a different insurance company).
Thus, the new rule changes indicate a total period limitation of 36 months (if renewed) and if additional coverage is needed after this completion date, a new health insurance plan would need to be purchased. In other words, there are no restrictions against stringing together several different short-term plans for an indefinite period of time. The removal of these restrictions could lead more patients to consider short term health insurance as a viable option for coverage and forecasts by the U.S. Health and Human Services Department suggest short-term health insurance purchases could increase by 600,000 in 2019.
So, technically, federal rules allow people to string together multiple short-term plans indefinitely. But there are quite a few states with much stronger short-term plan regulations, and some states have implemented new restrictions on short-term plans specifically in response to the new federal rules.
Short-term Plans Must Include Specific Disclosures
Finally, the recent legislation requires certain disclosures to be included in the information used to market short-term health plan information. This portion of the legislation was designed to ensure that patients understand the ways short-term plans might be different from more traditional health insurance coverage. Relevant companies like Health Insurance Innovations, Inc. (NASDAQ: HIIQ) have led the way to educate the public on these new requirements.
The verification systems implemented by HIIQ are designed to ensure patients fully understand at the point of sale the health coverage they are purchasing and this is an approach that is likely to be adopted by the industry over the next several years. To achieve this goal, HIIQ requires sales agents to outlining specific details of all coverage programs and read extensive product verification scripts with prospective insurance customers. For example, when a customer wishes to buy an insurance policy not covered by the Affordable Care Act, the company requires all sales representatives to bring this to the attention of patients.
Vice President of Compliance at HIIQ, Dan Garavuso, recently explained:
We provide a huge range of insurance policies catering to a full range of healthcare needs from dental care and vision through to emergency treatment. We maintain a verification script for each product, so in total, we manage nearly 50 scripts, each around thirty pages long.
At first, the extent of these new verifications processes may appear daunting from the perspective of patients. However, patients should understand that a wide variety of safeguards has been put in place to ensure the highest levels of transparency are evaluated. Mr. Garavuso goes on to explain some of the challenges involved when health insurance companies are designing a proper approach to regulatory compliance:
Here comes the challenge: What do you do when things change and you need to update the scripts? If an insurer alters their terms and conditions, you might have a handful of documents to update. But if state or federal regulations change, we need to verify that each product script is compliant and accurate, and ensure that the language is consistent across all affected policies.
Given the three important factors outlined above, we can see that the October legislative rule changes have increased the number of responsibilities that are required of the companies offering short-term program alternatives.
However, these regulatory changes have also added a great deal of flexibility and expanded the number of short-term health insurance options that are currently available to patients.
Ultimately, these complementary sides of the equation are designed to ensure transparency for patients and this is why we are likely to see increased adoption of these programs in 2019.