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The Rise of Short-Term Plans. Here’s How Your State is Responding.

By Andrew Wagner posted 03-29-2019 14:58

  
​Edited: June 27, 2019
     A regulation took effect on October 2, 2018, enabling “short-term limited duration” health insurance plans to be extended up to 1 year from the previous 3-month duration, and to be renewable for 36 months. Originally used as a method of bridging gaps in coverage—such as transitioning between jobs—short-term plans have now been strengthened by the Trump Administration to act as an alternative means of coverage to Affordable Care Act (ACA) plans. Last September, we brought up our concern over the negative effects of short-term plans on coverage of occupational therapy services. Short-term plans are not required to cover the same benefits that consumers may expect from an ACA plan, such as the 10 essential health benefits (EHBs), which include rehabilitation and habilitation. Since the change took effect, several states have taken action to regulate short-term plans, and researchers have had a chance to analyze marketing practices.

     The reaction among states to the rise of short-term plans is mixed. States are permitted broad authority to limit these short-term plans, and several have chosen to employ such action. Others, such as California, have banned them outright, whereas still others have placed no restrictions, enabling the plans to work at the full capacity of current federal rules. Hawaii prohibits the sale of a short-term plan to anyone eligible to purchase an ACA plan. Illinois limits short-term plans to less than 6 months and prohibits renewal. Arizona and Missouri laws conform state law to the federal policy. However, lawmakers in other states, such as Minnesota and Virginia, are working to change their laws so they can implement the federal policy, but have been unsuccessful so far.

     A study by the Urban Institute discovered that consumers shopping for ACA plans are often directed to broker sites that are inclined to sell short-term plans; provide minimal-to-no information regarding benefits, duration, or cost sharing of these plans; and use aggressive sales tactics. Another study, commissioned by a group of consumer representatives who advise the National Association of Insurance Commissioners (NAIC), tested consumers’ understanding of short-term plans based on a guided review of a popular short-term plan’s marketing materials. It found that consumers had a hard time understanding the plan’s benefits and limitations, and that the federally mandated disclosure didn’t help.  

     In addition, the Urban Institute study’s researchers interviewed state officials and regulators in eight states with varying regulatory approaches to their short-term plans. A common theme was the lack of adequate state oversight and enforcement. State regulators reported that there is insufficient tracking of which insurers are selling short-term plans—and which plans are actively marketed, and that they lack the authority to reject or request modifications to plans before they are sold. They share a concern that disclosures are inadequate.

     The federally required disclosure fails to adequately describe the scope and terms of short-term plans. Short-term plans are not required to have a standardized Summary of Benefits and Coverage (SBC), which would delineate whether benefits—such as occupational therapy, and to what extent—are covered or not. Some states are working toward or have already enhanced disclosures. For example, Washington State requires that short-term plans disclose to consumers the exact limitations of the coverage.

States that have banned or effectively banned (through regulation) short-term plans

State

Initial Plan Duration

Renewal

California

Plans banned

Hawaii

90 days (no plans available)

Yes, but effectively no due to regulations

New York

No plans

Massachusetts

No plans

 

New Jersey

Plans banned

Rhode Island

No plans

Vermont

3 months (no plans available)

No

Washington

3 months (no plans available)

 

States with plan durations of 3 months

State

Initial Plan Duration

Renewal

DC

3 months

No

Delaware

3 months

No

Hawaii

90 days (no plans available)

Yes, but only for those ineligible for on-exchange plans in the previous year, which is no one

Oregon

3 months

Yes, but only 3 months of a short-term plan are permitted, effectively denying renewal

Maryland

3 months

No

New Mexico

3 months

No

Vermont

3 months

No

Washington

3 months

No


States with plan durations of up to 6 months

State

Initial Plan Duration

Renewal

Colorado

6 months

No

Connecticut

6 months

No

Illinois

6 months

No

Indiana

6 months

No

Michigan

185 days

No

Minnesota

185 days

No (but, a different short-term plan can be purchased)

North Dakota

185 days

One renewal

Nevada

185 days

No

New Hampshire

6 months

No (but, a different short-term plan can be purchased)

Oklahoma

6 months

No

South Dakota

6 months

No

Virginia

6 months

No

 

States with 1-year plan durations

State

Initial Plan Duration

Renewal

Idaho

364 days

No

Kansas

365 days

One

Louisiana

12 months

Yes

Maine

364 days

Yes

Ohio

364 days

No

Utah

363 days

No

South Carolina

11 months

Yes

Wisconsin

365 days

Yes

 

States that employ short-term plans up to the full-scope of their federal guidelines

State

Initial Plan Duration

Renewal

Alabama

364 days

Yes

Alaska

364 days

Yes

Arizona

364 days

Yes

Arkansas

364 days

Yes

Florida

364 days

Yes

Georgia

364 days

Yes

Iowa

364 days

Yes

Kentucky

364 days

Yes

Missouri

Mississippi

364 days

364 days

Yes

Yes

Montana

364 days

Yes

Nebraska

364 days

Yes

North Carolina

364 days

Yes

Pennsylvania

364 days

Yes

Tennessee

364 days

Yes

Texas

364 days

Yes

West Virginia

364 days

Yes

Wyoming

364 days

Yes

Andrew Wagner is completing his doctoral experience with AOTA’s State Affairs and Health Policy Department.

This blog post was updated on 6/6/2019 to reflect a change in Missouri law and add information about the NAIC consumer representatives’ report.

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