Government continues to expand – and infringe on consumer choice in the process. Last month, the Biden Administration finalized a new rule that caps short-term limited duration health insurance plans (STLDI) to just four months… including renewals.
Short-Term Health Insurance Plans
The new rule takes effect on policies sold on or after September 1st, 2024. The reason: the government claims that the new rule will serve to protect consumers, because short-term health insurance plans were not intended to be a substitute for longer-term comprehensive, ACA-compliant health insurance products.
For example, STLDI policies typically exclude coverage for pre-existing conditions and certain screening and preventive services that the federal government deems as “essential benefits.”
Here are the new rules in a nutshell:
- Maximum Duration: The total duration of short-term plans is now limited to four months, including any renewals. Previously, these plans could extend up to 364 days, with the possibility of renewal for up to three years in some states.
- Clear Disclosures: Insurers are required to provide clear and prominent disclosures about the limitations of STLDI plans compared to ACA-compliant coverage. This includes information on the lack of coverage for pre-existing conditions, essential health benefits, and other key protections under the ACA.
- Consumer Protections: The rule emphasizes the need for consumer protections by ensuring that individuals are fully informed about the nature of the coverage they are purchasing. This measure aims to prevent consumers from inadvertently relying on inadequate coverage.
We’re all about more transparency and disclosure. Consumers should absolutely understand exactly what they are buying with an STLDI policy and its advantages and disadvantages compared to ACA-qualified health insurance plans and lower-cost non-insurance health sharing plans.
The problem with the new rules is the mismatch between the amount of time that can elapse between the loss of a health insurance plan and the effectiveness of a new one with the four month cap on short-term policies.
Not everyone wants or needs a full-fledged, expensive ACA-qualified health insurance plan especially if they don’t qualify for a health insurance subsidy under Obamacare.
Right now, we have a number of clients who have been informed that they don’t qualify for a subsidy this year, based on their recent tax filings. Their out of pocket costs are going up substantially, and are no longer affordable in some cases.
Simply offering a 60-day special enrollment period for them to buy a new overpriced Obamacare plan they can’t afford doesn’t solve the affordability problem.
Under current rules, an affordable short-term plan is enough to tide them over until the next open enrollment period and the time a new health insurance plan becomes effective.
But under these new rules, the four-month cap would not be sufficient, leaving them with a break in coverage that could last months.
A serious health issue in the interim could be financially devastating for these families.
Government bureaucrats don’t understand this dynamic—everyone in the U.S. health department has a secure government salary with employer-paid healthcare. The rest of us in the private sector, particularly independent workers, employees of small businesses with no group health plan, seasonal workers, and self-employed individuals in the “gig economy,” live in a different world.
While not very many people will be directly affected, short-term health insurance serves a vital niche in the health insurance landscape, and some of these people could be very severely affected by the unintended consequences of this decision.
That’s why we believe that beyond disclosure and transparency rules that enhance consumer power rather than restrict it, the bias should be strongly against federal interference in insurance markets and restrictions on consumer choice.
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We Oppose Restrictions on Consumer Freedom
The recent federal rule limiting the duration of short-term limited duration insurance (STLDI) plans to four months, including renewals, is an example of increased regulation.
While intended to protect consumers by ensuring they do not rely on inadequate shortlong-term coverage, this rule also has implications for personal freedom and choice.
- Restrictions on Personal Freedom: By capping the duration of short-term plans, the rule limits individuals’ ability to choose the type of health coverage that best suits their personal circumstances. For instance, some may prefer short-term plans due to lower premiums or because they only need temporary coverage during specific transitions, such as between jobs or before starting a new plan.
- Impact on Affordability: Short-term plans often offer a more affordable alternative to ACA-compliant plans. By restricting these options, consumers may be forced to purchase more expensive ACA plans, even if they do not need the comprehensive coverage these plans provide. This can strain financial resources, especially for individuals and families on tight budgets.
- Potential for Increased Uninsured Rates: As short-term plans become less accessible, some individuals may opt to forgo insurance altogether due to cost concerns. This can lead to higher uninsured rates and increased financial vulnerability in the event of medical emergencies.
Balancing Regulation and Freedom
While regulation is essential to protect consumers and ensure fair practices within the health insurance market, finding a balance is crucial.
Regulations should protect consumers without infringing on personal freedom and choice. Policymakers need to consider the diverse needs of consumers and the potential unintended consequences of overregulation.
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What You Can Do
As the new rule takes effect, consumers currently relying on or considering short-term health plans should take the following steps:
- Review Your Coverage: If you have an existing short-term plan, review the terms and duration of your coverage. Be aware of the limitations and exclusions associated with your plan. Now is the time to contact a Personal Benefits Manager and plan out how you will protect yourself and your family for the rest of the year and beyond.
- Renew coverage or get coverage in place before September 1st so your policy is exempt from the new restrictions.
- Explore ACA-Compliant Options: Consider exploring ACA-compliant health insurance options, which provide comprehensive coverage and essential health benefits. You may qualify for a subsidy. This is the best course of action if you or your family members have significant pre-existing conditions that may require ongoing care.
- Consider health sharing. You can sign up for a health sharing plan at any time, and they are significantly less expensive than a traditional health insurance product if you don’t get a subsidy. The disadvantage: They typically impose a waiting period before they will share costs related to pre-existing conditions.
- Stay Informed: Keep abreast of any additional state-level regulations that may impact your coverage options. Understanding the regulatory landscape will help you make better-informed decisions about your health insurance.
For Further Reading: Health Sharing Plans Vs. Short-Term Limited Duration Health Insurance: Which Is the Better Deal? | Short-Term Limited Duration Health Insurance – Get A Quote or Enroll Today | How Health Sharing Can Expand Healthcare Freedom
