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Feds outline new rules on short-term insurance

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New rules proposed by the federal government could open up consumer options for short-term health insurance plans.

The Centers for Medicare and Medicaid Services unveiled a proposal this week that would allow short-term health insurance plans to offer coverage for up to 12 months instead of the three months allowed since 2016.

Short-term health insurance plans are designed to provide coverage to individuals moving between comprehensive health insurance plans - when switching employers, for example.

Short-term plans are generally cheaper than comprehensive plans, but short-term plans lack many of the protections mandated by the Affordable Care Act, including coverage of pre-existing conditions.

The plans are not meant to replace comprehensive coverage, according to Pennsylvania's acting insurance commissioner Jessica Altman 

"Short-term limited duration plans are meant to cover gaps in coverage, not to be a substitute for major medical coverage. Making coverage more affordable to more consumers is a good idea, but short-term, limited-duration insurance is not an alternative," said Altman.

The commissioner expressed concern about the proposed rule, noting it would also allow people to renew coverage after the 12-month period. If people become sick and then renew with a short-term plan, said Altman, they could see an unexpected increase in their premiums and possibly have treatment specific to their illness excluded. 

"By potentially allowing [short-term] insurance to be extended a second year, it begins to look more like an alternative to major medical insurance, which it is not," said Altman.

In 2016, federal regulators began limiting short-term health insurance plans to three months after noticing a spike in the purchase of 12-month plans by people using them as their primary method of obtaining coverage.

According to figures from the National Association of Insurance Commissioners, over 148,000 Americans were covered under short-term medical plans in 2015. In 2016, that number rose to 160,000.

In the final rule issued in 2016, regulators noted that because of their growing popularity, the short-term plans were leading healthy, low-risk individuals away from ACA marketplace plans. Premiums paid by healthy patients help balance the cost of coverage for high-risk individuals.

According to Rob Glus, a partner at insurance Susquehanna Township-based consulting firm Conrad Siegel, healthier individuals will once again be drawn towards short-term plans and away from marketplace plans if the rule becomes final, further destabilizing the Affordable Care Act.

"If all these young and healthy people opt out of the pool for these short-term benefit plans, then the only people you're going to be left with in the pool are sicker people or people who are eligible for the subsidies," said Glus.

Glus linked it with similar moves by the Trump admnistration and congressional Republicans to weaken the ACA.

"This administration is trying to do anything it can to nibble away at the underpinnings of the ACA, and this is just another attempt," said Glus, who compared it to the removal of the individual mandate and the loosened rules for establishing association health plans. 

The new rules aim to provide consumers more choice in their health insurance plans, according to CMS. Using marketplace enrollment data from before the 2016 rule, the agency estimated between 100,000 and 200,000 patients will shift from Marketplace plans to short-term plans by 2019 if the new rules are made final.

According to Antoinette Kraus, founder and director of the Philadelphia-based nonprofit Pennsylvania Health Access Network, consumers should be wary of trying to replace their existing plans with short-term plans, which are not subject to the same rules as comprehensive plans, 

"We often see folks that come to us after the fact and they didn't realize it didn't cover certain things. All of a sudden they have to go get a test or get diagnosed with an illness and they find out their insurance isn't covering what they need," said Kraus.

Opening up these plans to longer limits, as CMS has proposed, could expose patients to being misled about what the plans do and do not cover.

"They end up stuck in these plans that seem like a good idea at face value, and they're basically stuck as if they didn't have health insurance in the first place," said Kraus. 

The proposal is open to public comment for 60 days, at which point the agency will publish all comments and publish a final rule on the 12-month limit. Consumers and businesses can enter public comment through the website of the Federal Register.

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