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Last week, the U.S. Department of Health and Human Services (HHS) released the final rule expanding the use of Short-Term Limited-Duration Insurance. For months, we have been highlighting how these “Junk Plans” would adversely impact both the Affordable Care Act (ACA) Marketplace and consumers with complex care needs. Short-term insurance is meant to be a stopgap for consumers who experience a temporary lapse in coverage. These bare bones plans were never intended to be used as long-term or comprehensive health insurance. Use of these plans had been appropriately limited to 90 days, but the current administration’s final rule expands their use up to a year, with the possibility of renewal for up to three years.

A senior advisor to the Secretary of HHS was actually reported as admitting the limits of these plans: "We make no representation that it's equivalent coverage. These policies will not necessarily cover the same benefits or extend coverage to the same degree." Because the plans are not “equivalent coverage” they are not required to abide by coverage standards set forth in the Affordable Care Act, and will not protect consumers who find themselves in need of comprehensive care. In addition, the plans are not required to cover essential health benefits, can deny coverage based on health status, gender or age, and can impose annual or lifetime limits on coverage.  And, although they offer inadequate coverage, the plans have high out-of-pocket costs.

As younger and healthier people are drawn to these short-term plans, older people and people who are sicker will face higher costs for remaining in the ACA Marketplace. Thus, the “Junk Plans” will undermine their benefits, destabilize the Marketplace and further inflate costs.     

Politico reports that “In 2017, insurers that sold short-term plans spent an average of [only] 65 percent of premium revenues on medical costs, according to the National Association of Insurance Commissioners, far below the 80 percent threshold that Obamacare plans must meet.”

We call on HHS to ensure consumers understand the limits of these inadequate plans and make it clear that they are not ACA plans. Consumers must understand exactly what they are getting with these plans – which, unfortunately, isn’t much.

 

August 9, 2018 – B. Belton

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