Sworn enemies of the Affordable Care Act system are hoping the new Trump administration short-term health insurance proposal will shred ACA individual market rules.
ACA supporters say implementing the new draft regulations as written could push many people to replace high-quality major medical coverage with junk coverage.
The proposal could bring back something like the short-term health market that existed in 2016, the analysts predict.
The analysts size up the proposal in the introduction to the new proposed regulations.
The Trump administration is preparing to publish the draft regulations in the Federal Register on Wednesday.
A preview copy of the draft regulation packet is available here.
Here are seven proposal highlights, drawn from the packet.
1. The proposal is just a draft.
Officials at EBSA, CMS and the Internal Revenue Service developed the draft in response to an executive order that President Donald Trump issued in October.
In that order, Trump asked officials in his administration to try to eliminate regulatory obstacles to use of interstate association health plans, health reimbursement arrangements, and short-term health insurance.
Officials note in the introduction that the draft must still go through a public comment process.
2. The proposal would repeal a limitation that the administration of former President Barack Obama imposed on short-term health insurance issuers in 2017.
Before 2017, the federal government required only that a short-term health insurance policy last less than a year.
Some states shut short-term health insurance policies out. Some let the same issuer cover the same insured for up to 364 consecutive days.
Drafters of the Affordable Care Act included a provision that exempted short-term health insurance, and other products that traditionally fell outside the scope of either ERISA or the Health Insurance Portability and Accountability Act of 1996, from ACA major medical insurance requirements.
The ACA now, in most cases, requires an issuer of new individual major medical coverage to cover at least about 60% of the actuarial value of a standard “essential health benefits” (EHB) package that includes hospitalization benefits, physician services benefits, maternity benefits, and behavioral health benefits. An issuer subject to the ACA must cover the EHB benefits without imposing any annual or lifetime maximum on coverage for those benefits.
The issuer of new, ACA-compliant individual coverage cannot consider any factors other than age, location and tobacco use when deciding whether to issue coverage, or when deciding what price to charge.
Former President Barack Obama (Photo: White House) Because issuers of short-term health insurance are exempt from the ACA, they can, under federal law, decide which services to cover; set annual and lifetime caps on benefits; and use medical underwriting.
Many states have set strict requirements for short-term health insurance issuers’ benefits and underwriting practices, but some haven’t.
Some major medical coverage issuers, state insurance regulators and health policy specialists argued that federal regulators had to put new limits on short-term health insurance, to keep short-term health issuers from using their freedom from ACA rules to lure young, healthy adults away from the individual major medical market with cheap, skimpy coverage.
The Obama administration obliged in early November 2016. The administration limited the duration of any new short-term health insurance policy sold after March 31, 2017, to three months or less, to reduce the odds that consumers would try to use short-term health insurance as a year-round alternative to major medical coverage.
The new Trump administration draft regulation would lift that three-month federal short-term health insurance duration cap.
Under federal rules, a short-term health insurance policy could stay in effect up to 364 days and still be considered a short-term health insurance policy.
Officials note, however, in a section on federalism, that states could continue to impose their own requirements, including state-level benefits period duration limits.
The new regulation would take effect 60 days after a final version was published in the Federal Register.
3. CMS is in charge of processing people’s comments on the draft regulation.
CMS, an arm of the U.S. Department of Health and Human Services, is working with EBSA, which is an arm of the U.S. Department of Labor (DOL), and the IRS, which is an arm of the U.S. Treasury Department.
The three agencies share jurisdiction over most private health insurance matters that have something to do with the Affordable Care Act and with an older benefits law, the Employee Retirement Income Security Act of 1974 (ERISA).
But, in the introduction to the draft, the drafters point out that CMS is overseeing draft-related correspondence that comes in via regular mail.
4. The proposal packet shows which human beings are shaping the proposal.
Three of the top-level officials who signed the packet are well-known: Alex Azar II, the newly sworn-in DOL secretary; Preston Rutledge, the newly sworn-in DOL assistant secretary in charge of EBSA; and CMS Administrator Seema Verma.
The fourth is an IRS official who is not well-known outside of Washington: Kirsten Wielobob, the IRS deputy commissioner for services and enforcement.
Wielobob earned a bachelor’s degree from Smith College in 1989 and a law degree from George Washington University in 1992, according to her LinkedIn entry. She has been working for the IRS since 2009.
The rank-and-file federal employees listed as contact people are Amber Rivers and Matthew Litton, at the DOL; Karen Levin, at the IRS; and David Mlawsky, at CMS.
5. Comments will be due at 5 p.m. Eastern time on April 23.
Commenters can submit comments either by mail or by going to https://www.regulations.gov.
6. EBSA and CMS impact analysts are not sure the impact of the proposal would be all that big.
The analysts point out that, in 2016, before the Obama administration duration limit kicked in, the short-term health insurance market was much smaller than the Affordable Care Act public exchange individual major medical market.
The short-term health insurance issuers generated just $146 million in premiums that year, and they ended the year covering 160,000 people.
ACA public exchange plans generated $63 billion in premiums and ended 2016 with 13.6 million covered lives.
Congress recently moved to eliminate the effect of the penalty that the ACA has imposed on people who fail to have what the government sees as solid health coverage. The new law is on track to cut the penalty rate to zero in 2019.
That change could have a big effect on the individual major medical market, the impact analysts say.
The analysts predict that setting the penalty at zero will reduce the number of people with coverage in 2019 to 9.2 million, from 13 million, and increase the average monthly premium for exchange plan coverage to $714, from $649.
The analysts predict that, if another 200,000 exchange plan users shift to short-term health insurance policies, and those plan shifters tend to be younger, healthier exchange plan users, that will increase monthly exchange plan premiums just $4 more per month, to $718 per month.
“There is significant uncertainty regarding these estimates, because changes in enrollment in premium would depend on a variety of economic factors and it is difficult to predict how consumers and issuers would react,” the analysts write.
7. The regulation drafters have questions.
Here are a few of the topics the drafters want to hear from commenters about:
- Whether any regulations or policies other than the three-month duration limit are keeping insurers out of the short-term health insurance market.
- Whether the impact analysts’ predictions are reasonable.
- How the proposed regulations might affect the age and health of short-term health insurance buyers.
- Whether trying to implement the proposed regulations in the middle of the plan year could cause problems for any group health plans that are somehow affected, due to interactions between employees’ coverage and state or federal benefits mandates.
— Read 5 Hot Battles Over the ACA-Free Zone on ThinkAdvisor.