A federal judge has issued a ruling that could help issuers, distributors and purchasers of short-term health insurance.
Senior U.S. District Judge Richard Leon has rejected efforts by physician groups, consumer groups, mental health groups and other parties to keep the Trump administration from letting short-term health insurance arrangements stay in place for up to three years.
Drafters of the Affordable Care Act (ACA) of 2010 have exempted short-term health insurance policies from the pricing rules, benefits rules and other rules that apply to major medical insurance. A short-term health insurance issuer can set a $50,000 annual benefits limit; exclude coverage for broken bones, or for mental health care or maternity care; and reject applications from people who have cancer, heart disease or acne.
Before early 2017, the federal government left the maximum duration of short-term health insurance policies up to the states.
The administration of former President Barack Obama then imposed a three-month limit on short-term health insurance policy benefits periods. Obama administration officials argued that the benefits period limit was necessary, to make sure that consumers received solid, ACA-compliant coverage, and to keep cheap, low-value short-term health insurance policies from luring the youngest, healthiest consumers away from the individual major medical market.
The administration of President Donald Trump has completed work on regulations that reverse the Obama-era regulations. The new regulations, which took effect in October 2018, let a consumer buy a short-term health insurance policy with an initial duration of up to 364 days. The regulation lets the consumer renew the policy for up to three years.
The new regulation affects only federal rules. States can set their short-term health insurance duration limits, or ban the sale of short-term health insurance altogether.
The list of plaintiffs in the case Leon decided, Association for Community Affiliated Plans et al. v. U.S. Department of Treasury et al. (Case Number 1:18-cv-02133), includes the Association for Community Affiliated Plans (ACAP), a group for nonprofit health plans.
The plaintiff list also includes AIDS United, the American Psychiatric Association, Little Lobbyists LLC, Mental Health America, the National Alliance on Mental Illness and the National Partnership for Women & Families.
The plaintiffs contend that letting short-term health insurance policies stay in place for up to three years could hurt people with conditions such as depression and leukemia, by letting plans that shut out applicants who are sick, or who exclude coverage for expensive conditions, take business away from plans to provide a full range of care for the sick.
The plaintiffs have argued that the new short-term health insurance regulations conflict with the intent of the ACA drafters to create a strong individual major medical insurance market, without use of mechanisms for shutting out sick people, or for charging sick people higher prices for coverage.
The defendants — the United States of America, the U.S. Department of Treasury, the U.S. Department of Labor, the U.S. Department of Health and Human Services (HHS), and the secretaries in charge of the Treasury, HHS and Labor departments — have argued that short-term health insurance policies provide a valuable, affordable coverage alternative for people who are unable to afford major medical insurance, or who are shut out of purchasing individual major medical coverage by the “open enrollment period” rules that limit when people can buy individual major medical coverage without showing they have what the government sees as a good reason to be buying coverage.
The open enrollment period system is supposed to give healthy people an incentive to pay for coverage, by raising the possibility that they could lack coverage, and face huge medical bills, if they go without coverage and then face a medical catastrophe outside of the annual open enrollment period.