The Trump administration’s rule allowing short-term, limited duration plans for longer terms, which took effect in October 2018, was upheld two weeks ago by the US Court of Appeals for the District of Columbia Circuit. This decision came nearly a year after a federal district judge originally upheld the final rule.
The recent ruling is another win for companies selling short-term plans but a loss for health insurers selling individual plans compliant with the Affordable Care Act (ACA) and providers whose patients may opt for skimpier coverage under a short-term plan. In a statement, the Association for Community Affiliated Plans (ACAP), the named plaintiff in the lawsuit, said it is “confident the full D.C. Circuit will agree,” implying that it plans to request that the case be reheard by the full panel of judges on the Court of Appeals.
ACAP and the other plaintiffs had argued that the 2018 rule included an unreasonable interpretation of “short term” and “limited duration” and that the rule contradicts the spirit of the ACA because Congress intended to create a single, ACA-compliant individual market and short-term plans fall outside of that market, potentially destabilizing it.
The Court of Appeals held that the Trump administration’s definitions of “short term” and “limited duration” were not unreasonable, that Congress excluded short-term plans from ACA individual insurance market requirements and that the rule has not destabilized the individual market.
Under the 2018 final rule, the definition of a short-term plan was updated from a plan less than three months long including renewals—a definition established by an Obama administration rule that took effect for policy years 2017 and beyond—to a plan effective for less than 12 months from the initial effective date with renewals allowing for a total duration of no more than 36 months.
As the Court of Appeals noted, short-term plans are not subject to ACA requirements for individual health insurance coverage. These plans do not have to cover the 10 categories of ACA essential health benefits, can exclude coverage for preexisting conditions, can impose annual and lifetime dollar limits on benefits and can deny initial coverage or renewal of coverage based on a person’s health status. A recent investigation into short-term plans by the House Committee on Energy and Commerce detailed challenges that consumers have faced with these plans.
In the midst of a global pandemic and global recession, short-term plans could have a bigger impact than previously expected on health insurers offering ACA-compliant plans through the individual market and on provider revenues. More people could enroll in these plans as individuals look for affordable health insurance plans in the midst of the pandemic. In a survey of 2,500 consumers conducted by HRI in early May, 18% of respondents said they would be willing to select a health plan that does not pay for care for existing health conditions but that would pay for new health issues that arise.
A recent analysis by HRI found that over 18 million people could lose employer-based coverage because of the pandemic. Some of these individuals will be eligible for Medicaid or individual plans sold on the ACA markets with premiums subsidized by the federal government. Those who are not eligible may opt for a short-term plan over being uninsured or continuing coverage via the Consolidated Omnibus Budget Reconciliation Act (COBRA), which allows temporary extension of employer-sponsored coverage paid for by the employee.
The Families First Coronavirus Response Act (FFCRA) includes funding for COVID-19 testing and treatment for the uninsured. The FFCRA defines individuals enrolled in short-term health plans as uninsured for purposes of this funding. This is likely a win for companies selling short-term health plans, who are not on the hook financially for COVID-19 testing or treatment, unlike other group and individual health plans, which are required to cover COVID-19 testing and treatment without cost sharing.
This could also be positive for providers treating COVID-19 patients as it provides a source of reimbursement, via the Provider Relief Fund, for COVID-19 testing and treatment of individuals on short-term plans, plans that may or may not cover the costs of testing or treatment. It remains unclear whether providers should seek reimbursement for COVID-19 testing and treatment of individuals on short-term plans from the short-term plan first, or directly from the Provider Relief Fund.
COVID-19 could be considered a preexisting condition, meaning short-term plans could deny any claims that could be tied to a prior COVID-19 diagnosis. There have been increasing reports of COVID-19 symptoms lasting for weeks or even months, and virtually nothing is known about the long-term health consequences of the disease.
As a result, providers and consumers could see an increase in claims denied by short-term plans as COVID-19 related for individuals who previously tested positive for COVID-19. This could lead to further, lasting disruption of revenue for providers who are already facing a revenue shortfall during the pandemic.