NAIC opposes federal short-term health limit

State regulators say healthy consumers could evade a proposed 3-month benefit period cap

John Huff, president of the National Association of Insurance Commissioners, is also Missouri's director of insurance. (Photo: Missouri Department of Insurance, Financial Institutions and Professional Registration) John Huff, president of the National Association of Insurance Commissioners, is also Missouri's director of insurance. (Photo: Missouri Department of Insurance, Financial Institutions and Professional Registration)

State insurance regulators have teamed up to object efforts by the Obama administration to put new curbs on short-term health insurance plans and indemnity health insurance products.

John Huff, the president of the Kansas City, Missouri-based National Association of Insurance Commissioners, and three other top NAIC officers have written on behalf of members to oppose the administration's draft regulations, which were developed by the Internal Revenue Service, the U.S. Department of Health and Human Services, and the Employee Benefits Security Administration.

The NAIC is a group for insurance regulators.

Related: 3 flares from the short-term health firefight

The so-called "tri agencies" have proposed limiting the duration of an insurer's short-term medical insurance policies to three months or less, and to prohibit renewals beyond that three-month period.

The tri agencies  also have proposed requiring indemnity health insurance policies to pay a fixed benefit per period of time for an insured who qualifies for benefits, rather than letting an issuer choose between paying a fixed benefit per period of time, or a flat benefit per event.

A policy could pay an insured who entered the hospital $100 per day, but it could not pay a $1,000 flat amount to an insured who had surgery.

The tri agencies said they want to take steps to keep consumers from using 364 days of short-term medical insurance, or indemnity health insurance, as a substitute for major medical policies that comply with Affordable Care Act rules. 

Huff, who was appointed Missouri insurance director by a Democratic governor, and his colleagues argue in their letter that federal interference in the insurance market may cause new problems, without doing much to solve existing problems.

The tri agency proposal would limit an issuer to issuing short-term medical coverage for no more than three months, for example, but it would do nothing to keep a healthy insured from using four three-month policies from four separate insurers to get a full year of coverage, according to the NAIC officers.

"Only those who become unhealthy will be unable to afford care, and that is not good for the risk pools in the long run," the NAIC officers wrote.

There are also many consumers who have good reasons to prefer a short-term plan, and some who are simply not afford any ACA-compliant major medical plan, the NAIC officers said.

"Their options should not be limited to either paying for coverage they cannot afford or exposing themselves to the risk of losing their coverage after three months if they become sick," the NAIC officers said.

Instead of limiting short-term medical policy durations, regulations should focus on warning consumers about the products' limitations, and educating consumers about how using short-term medical coverage in place of major medical coverage may force them to pay tax penalties, the NAIC officers say.

In a section on indemnity health insurance, the NAIC officers say limiting insurers to selling indemnity policies that pay a fixed benefit per period of time conflicts with federal law.

"We recommend that this proposal be withdrawn," the NAIC officers wrote. 

Related:

Federal regulators may try to kill critical illness insurance

Health broker: Non-PPACA market is jumping

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