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July 10, 2023 at 03:18 PM
What You Need to Know
- In 2010, the Affordable Care Act began to create a world of health insurance products outside the reach of the ACA.
- The Obama administration tried to tame the non-ACA world.
- The Trump administration loosened the rules.
- The Biden administration proposed tightening the rules in ways that could eliminate entire classes of products.
The administration of President Joe Biden has proposed sharp new limits on some health insurance products that fill in gaps in major medical insurance coverage.
Three federal agencies want to block insurers from selling indemnity health insurance policies that pay a fee for each service, pay the health care providers directly or make any direct effort to plug a patient’s health insurance holes.
The agencies also want to limit the duration of any new short-term health insurance policy to an initial term of three months, along with a one-month extension.
The agencies — the Internal Revenue Service, the U.S. Department of Labor’s Employee Benefits Security Administration and the U.S. Department of Health and Human Services — unveiled a preliminary version of the draft regulations Friday. The draft is set to appear in the Federal Register on Wednesday.
What It Means
If you have clients who hate the idea of buying “Obamacare,” or who are between jobs and want an affordable alternative to Affordable Care Act exchange plan coverage, those clients may soon face tighter restrictions on the kinds of coverage they can buy.
The Current Non-ACA Health Market
Individual short-term health insurance policies covered 173,000 people in 2021, down from 238,000 in 2020 but up from 87,000 in 2018, according to the tri-agency team officials.
Officials did not have any numbers for people covered by short-term health insurance coverage sold through associations or for people covered by other types of health policies other than major medical policies.
They cited earlier research suggesting that insurance agents might get commissions averaging 23% of the premiums for the sale of short-term health insurance and 2% of the premiums for individual major medical insurance.
The History
Most of the first modern U.S. health insurers sold indemnity policies that paid a flat fee for each service provided.
Patient advocates, many health care providers and other health policymakers later promoted a shift to a comprehensive, soup-to-nuts approach.
When members of Congress were drafting and debating the two bills that created the Affordable Care Act package of 2010, they responded to that conflict by applying strict benefits and underwriting rules to newly sold major medical coverage but excluding other, “excepted” benefits — such as indemnity health insurance, or products that were “excepted from” the old Health Insurance Portability and Accountability Act of 1996 major medical coverage rules — from the ACA major medical rules. Drafters also provided a separate exclusion for short-term health insurance.
The administration of former President Barack Obama tried to keep insurers from using short-term health insurance to avoid the ACA major medical insurance rules by capping the duration of short-term health insurance policies at 90 days.
Under former President Donald Trump, the agencies changed course and let short-term health insurance policies stay in place for up to 36 months.
State insurance regulators have been working at the National Association of Insurance Commissioners to update their own standards for short-term health and excepted benefits products.
The Draft Regulations
The tri-agency team that developed the new 182-page draft regulation packet plans to accept comments on the draft for at least 60 days after the official Federal Register publication date.
The team’s top goal is to keep consumers from thinking of short-term health and excepted benefits products as an alternative to ACA-compliant major medical insurance, officials said.
Officials call short-term health insurance “short-term, limited-duration insurance.”
In addition to capping the duration of new short-term health insurance at four months, the agencies would require short-term health insurance sellers to provide a notice declaring that the policy offered is not comprehensive health insurance, might not cover preexisting conditions and won’t give the purchaser access to federal ACA public exchange premium subsidies.
The provisions for “fixed indemnity excepted benefits” would allow insurers to sell only policies that pay out a specified amount of cash over a specified period of time, such as policies that pay $100 per day when an insured patient is hospitalized.
An issuer would have to pay the cash benefit for a covered event “without regard to whether benefits are provided with respect to such an event under any other health coverage maintained by the same issuer,” officials say.
High-Tech Indemnity Health
Today, some startup insurers offer policies that use mobile phone-based apps to pay a fixed amount of cash for hundreds or thousands of health care services, but not for the full range of services that would be covered by an ACA-compliant major medical insurance policy.
In some cases, patients can use debit cards provided by the insurer to pay the provider.
“By providing direct reimbursement for health care items and services to a provider or facility, these arrangements further obscure the differences between fixed indemnity excepted benefits coverage and comprehensive coverage,” officials say in the introduction to the proposed regulations.
