CMA Comments on Short-Term, Limited-Duration Insurance Proposed Rule (CMS-9924-P)

April 23, 2018

Via Electronic Submission: Regulations.gov

U.S. Department of Health and Human Services
200 Independence Avenue S.W.
Washington, DC 20201

RE: Comments on Short-Term, Limited-Duration Insurance Proposed Rule (CMS-9924-P)

The Center for Medicare Advocacy (Center) is pleased to provide comments on the proposed rule on short-term limited-duration insurance. The Center, founded in 1986, is a national, non-partisan law organization that works to ensure fair access to Medicare and quality healthcare. At the Center, we provide education and advocacy on behalf of older people and people with disabilities to help secure fair access to necessary health care. We draw upon our direct experience with thousands of individuals to help educate policy makers about how their decisions affect the lives of real people. Additionally, we provide legal representation to ensure that people receive the health care benefits for which they are eligible, and the quality health care they need.

We strongly object to the proposed rule on short-term limited-duration insurance. The proposed rule rescinds restrictions on short-term plans, thereby allowing insurers to offer “junk” insurance policies to millions of consumers. These plans exclude coverage for critically important health care services; vary premium rates by gender, health status, and age; and put individuals and families at significant financial risk. In addition, expanding these types of plans will undermine the individual market by pulling healthy individuals away and leaving an older, sicker risk pool behind. Many individuals who rely on comprehensive coverage – including women, older adults, and people with chronic conditions – would be left without affordable, comprehensive options.

This proposed rule comes on the heels of the Notice of Benefit and Payment Parameters for 2019 final rule. The final rule is another assault on the Affordable Care Act (ACA) and its benefit and coverage protections.  Similar to our comments offered here, the Center, working with other advocacy partners, submitted comments and signed-on to letters opposing the previous rule. Among other things, we continue to oppose “changes to the Essential Health Benefits (EHBs) standard which would lower the threshold of covered services and leave many consumers without access to the health care they need.”

Implement the Affordable Care Act  

The ACA is the law of the land, and HHS is legally obligated to implement the law as we stated multiple times in various comments to previous proposed rules and requests for information. The Centers for Medicare & Medicaid Services recently released the Final Enrollment Report for the 2018 Health Insurance Exchanges. The report showed that in spite of attempts by the Administration to undermine the ACA, nearly 11.8 million people “selected or were automatically re-enrolled in an Exchange plan…”  These numbers show that American consumers value fair access to quality comprehensive health coverage. For months, the Center has highlighted the roadblocks the Administration put up, such as cutting the enrollment period in half; slashing funding for enrollment assistance and advertising; refusing to participate in enrollment events; shutting down healthcare.gov during critical times; and issuing regulations that will undermine benefits, erode ACA coverage protections and further inflate costs. 

Kaiser Health recently released data showing that ninety percent of individual market adult consumers say they still plan to buy coverage next year. This was even after they were told the individual mandate has been repealed. The Kaiser data is further evidence that Americans value access to quality health coverage.  Attempts to undermine this coverage must end.

Short-term policies offer junk insurance that fails to meet the needs of consumers.

Short-term, limited-duration insurance is intended to provide temporary insurance during unexpected coverage gaps. This type of coverage is exempt from the definition of individual health insurance coverage under the ACA and, therefore, does not have to comply with the law’s core consumer protections. The proposed rule, therefore, promotes and will increase take up of skimpy, junk insurance coverage with minimal protections for consumers. Specifically, such coverage:

• Has high out of pocket costs,
• Limits the coverage people can receive each year and over their lifetime,
• Discriminates against individuals, and
• Excludes basic health care services.

Short-term plans discriminate against individuals based on their health status.  Because short-term plans are exempt from the ACA’s pre-existing condition protections, plans can deny coverage altogether or deny coverage of specific services based on health status and medical history. Some insurers go as far as defining a condition to be preexisting if a member had symptoms within the prior five years “that would cause a reasonable person to seek diagnosis, care or treatment,” even if she did not receive care, and even if she was not aware of the condition.  Some plans also exclude services that disproportionately affect older people and people with disabilities.  

Short-term plans are not required to cover essential health benefits. In addition to being able to exclude coverage for pre-existing conditions, these plans are also allowed to categorically exclude certain benefits, such as routine maternity and newborn care, prescription drugs, mental health care, substance use services, and preventive services. Without these essential benefits consumers will lack adequate coverage. As we expressed in a sign-on letter to HHS, one of our concerns is “that these plans could decide not to cover rehabilitative and habilitative services and devices or significantly limit the scope of these benefits.” In previous comments we stated that the EHB requirement has helped ensure people have access to basic health care services and has closed health care coverage gaps that for decades had left individuals underinsured. Before the ACA, consumers often did not have health coverage for services that are now covered as EHBs. These benefits are critical for the health and well-being of millions of consumers, including people who are older or have disabilities.

Insurers who sell short-terms plans frequently discriminate based on gender, including charging women higher premiums. ACA protections prohibit plans from basing premiums on anything other than age (within a 3:1 ratio for adults), tobacco use, family size, and geography. Before the ACA took effect, 92 percent of best-selling plans on the individual market practiced gender rating (charging women higher premiums than men). These predatory practices used to cost women approximately $1 billion a year[1] and are still commonplace among insurers selling short-term plans. Health questionnaires are also often used by short-term plans to identify and deny coverage to people with preexisting conditions.  Short-term plans also discriminate based on gender identity by excluding coverage for transition-related services, such as surgery. 

Short-term plans also impose lifetime and annual limits. An individual or family could quickly meet their annual and lifetime limit with expensive health care costs and treatment for a catastrophic medical emergency. The impact to individuals and families could be financially devastating and leave them without coverage. One insurer, for example, caps covered benefits, including treatment, services and supplies at just $750,000 per coverage period. At least one insurer provides per-service limits such as $1000 per day for hospital room and board, $500 per day for emergency room services, $250 per trip for ambulance, and $10,000 for AIDS treatment.[2] These limits amount to woefully inadequate coverage for consumers and their families.

Short-term plans are also not subject to the ACA’s out-of-pocket maximum requirements, which can leave consumers facing major, unpredictable financial risk. The ACA limits out-of-pocket maximums to $7,350 for individual coverage for the entire year, but some short-term plans may require out-of-pocket costs in excess of $20,000 per individual per policy period.[3] In some cases, out-of-pocket maximums for short-term plans are misleading and appear to be smaller than they are because the deductible does not count toward the maximum.

Expanding the availability of short-terms plans creates an uneven playing field. Due to discriminatory and predatory practices, short-term plans are able to offer low premiums and attract younger and healthier individuals, leaving older, sicker and costlier risk pools behind in the ACA-complaint market. If healthier individuals are syphoned from the individual market, costs will increase and plan choices will decrease for individuals remaining in those markets. Consumers who need comprehensive coverage, including those with pre-existing conditions, and middle-class consumers with incomes too high to qualify for subsidies, would face rising premiums and potentially fewer plan choices.

Specific Recommendations

1. Short-term limited-duration plans should not be expanded to more than three months (§54.9801-2 / §2590.701-2 / §144.103).

Short-term plans are designed to fill temporary gaps in coverage. These policies should not exceed three months.  The proposed rule would allow short term plans to enroll individuals for as long as 364 days. Allowing extensions of these policies expands the period of time in which people may be underinsured, leaving consumers with inadequate coverage and at financial risk if they fall ill. Yearlong short-term plans would create consumer confusion about whether the coverage is the same as would be available through ACA-compliant one-year plans. Moreover, consumers could be left with uncovered bills and/or find themselves “uninsurable.”

Consumers seeking coverage for three months or longer can get covered through the Marketplaces. Allowing short-term plans longer than three months undermines the ACA and the risk pools in the individual market by encouraging healthy people to use short-term plans as an alternative to ACA plans. This would drive up premiums in the individual market, making comprehensive coverage with pre-existing condition protections less affordable for consumers, particularly those that are ineligible for premium tax credits.[4]

We strongly oppose the proposed changes to the regulation at §54.9801-2 / §2590.701-2 / §144.103. The existing definition limiting the duration of short-term limited-duration insurance to “less than 3 months” should remain, as should the language “taking into account any extensions that may be elected by the policyholder with or without the issuer’s consent.”

Short-term limited-duration insurance is, by name, meant to be for a short, limited duration. As noted above, allowing these plans to continue for 12 months or longer places people in plans with limited coverage and at significant financial risk. Allowing renewals would suggest clear intent to circumvent the ACA and undermine the risk pools in the ACA-compliant individual market. States are the primary regulators of insurance and should maintain authority to regulate the renewability of these plans and the application and reapplication process. We strongly oppose any consideration of allowing short-term health plans to exceed three months, much less 12 months or longer.

2. Consumer notices should be explicit, in multiple languages, about ACA requirements that do not apply to short term plans (§54.9801-2 / §2590.701-2 / §144.103).

Consumers who purchase short-term, limited-duration policies must understand the coverage they are purchasing. We believe notice is vital for consumers to understand the limits of short-term plans and that they are not comprehensive coverage. We appreciate the specific language that clarifies that the plan does not comply with federal requirements and that enrollees might have to wait until an open enrollment period to get other health insurance coverage.

We recommend, however, that the notice needs to be clearer to be more easily understood by consumers and that the notice be available in multiple languages. As the preamble notes, allowing short-term plans to provide coverage for just under one year will make it more difficult for consumers to distinguish between short-term plans and ACA plans. The notice must make clear how short-term plans differ from ACA plans. We recommend listing specific examples of ACA protections in the notice, including preexisting conditions and essential health benefits. The draft notice language also is not clear enough that loss of eligibility or coverage in a short-term plan does not trigger a special enrollment period.

3. Short-Term Plans Will Pull Millions Away from ACA Individual Market

The estimates in the fiscal impact statement on the number of people enrolled undercounts the individual insurance market. The National Association of Insurance Commissioners (NAIC) report on which the estimate was based fails to include short-term plans sold by discretionary associations or similar arrangements. Recent reports have suggested enrollment in short-term plans may be closer to one million today.[5] The Urban Institute has estimated that, as a result of this proposed rule, 4.3 million people would enroll in short-term plans in 2019.[6] The Urban Institute also estimated that the effect of the proposed rule, in combination with the elimination of the individual mandate penalty, would reduce enrollment in ACA-compliant plans by 18.3 percent.[7] The American Academy of Actuaries reaffirms the argument that short-terms plans will attract healthy individuals, causing the potential for market segmentation and adverse selection, and therefore increase premiums in the ACA-compliant market. As noted throughout, this rule will have the effect of undermining and weakening the ACA-compliant market – leaving people with higher premiums and fewer plan options.   Often referred to, accurately, as “junk plans” or “fake insurance,” these plans offer insurance in name only, and would leave consumers without any real coverage when they need care the most. As the Center has highlighted over the last few months, this would also leave consumers who remain in the individual market – including those who are older or have pre-existing conditions – with higher costs. These plans will do nothing but undermine benefits, erode ACA coverage protections and further inflate costs.

Conclusion

We appreciate the opportunity to submit these comments. For additional information, please contact David Lipschutz, Senior Policy Attorney (licensed in CA and CT), at dlipschutz@medicareadvocacy.org, or 202-293-5760.