Short-term health seller fights back

HHS acts

Traditionally, the federal government has classified short-term health insurance, or short-term medical insurance, as an “excepted benefit” that falls outside the scope of the Health Insurance Portability and Accountability Act, the Affordable Care Act and other federal laws that set standards for major medical coverage.

Because of that, issuers can use medical underwriting to screen applicants, charge older insureds much more than they charge younger insureds, and set tight limits on both annual and lifetime benefits. Unlike a major medical plan, which must cover maternity care, must provide unlimited coverage for what the government classifies as essential health benefits, and must take applicants with heart disease or cancer who apply during an annual open enrollment period, a short-term health insurance issuer can hold premiums down by rejecting sick applicants, excluding coverage for any services it chooses not to cover, and setting low annual benefits limits.

Regulators have argued that short-term health coverage issuers deprive coverage purchasers of important ACA consumer protection provisions, may mislead purchasers about the nature of the coverage, and may hurt issuers of individual major medical coverage by drawing younger, healthier consumers out of the ACA-compliant individual major medical coverage risk pool.

To address those concerns, HHS announced Friday that it will limit a short-term health insurance issuer to providing just three months of coverage at a time, to keep consumers from using short-term health insurance policies that last for, for example, 364 days as a substitute for major medical coverage.

McNamee said Health Insurance Innovations is disappointed about that rule change and believes it will leave consumers with fewer affordable coverage options.

Related:

3 flares from the short-term health firefight

Federal regulators may try to kill critical illness insurance

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