By Carmel Shachar
Once it became clear that Congress did not have the appetite to repeal the Affordable Care Act (ACA), the Trump administration has pursued a strategy of “nibbling” around the edges of the ACA through regulations and rule making.
One of these nibbles included an expansion of short-term limited duration insurance (STLDI) plans, insurance schemes which a group of representatives called “junk plans” in an open letter to the National Association of Insurance Commissioners last month and which California may soon ban altogether by the end of September.
Recently, several organizations, including the Association for Community Affiliated Plans (ACAP), National Alliance on Mental Illness (NAMI), Mental Health America, American Psychiatric Association (APA), AIDS United, National Partnership for Women & Families, and Little Lobbyists, filed a suit to block the implementation of STLDI plan expansion and mitigate the impact it will have on the health insurance marketplaces.
STLDI plans are notable for several reasons.
First, they are exempt from many of the ACA’s requirements for health insurance, including the prohibitions on charging higher premiums based on health status, excluding coverage for preexisting conditions, having annual or lifetime limits, and choosing not to cover certain classes of medications. In that sense, they look a lot more like health insurance plans pre-ACA than they resemble the plans that are currently available on the marketplace.
Second, in part because they are exempt from all these regulatory requirements, STLDI plans are significantly cheaper than other insurance plans. This makes them more attractive to healthier individuals, who are betting that they won’t have significant health needs in the short term and would rather pay less for their coverage.
Third, they are meant to be short-term (hence the name) and to fill temporary gaps an individual may have in health insurance coverage. For example, when someone is between jobs.
What short-term means, however, depends on who you ask.
In a recent rule issued by the Trump Department of Health and Human Services, Internal Revenue Service, and Department of Labor, short-term is defined as 364 days or less and allows insurers to renew or extend short-term coverage for up to thirty six months. This new rule is in some ways a throwback to previous definitions of STLDI, which had also been for 364 days or less.
The Obama administration, however, considered short term to be three months or less, in part to make sure that STLDI plans did not cannibalize the Marketplaces and divert people from more comprehensive (but expensive) coverage.
The problem with the move back to a more generous definition of short-term is that, as the agencies issuing the rule acknowledge, allowing STLDI plans to function as an alternative to longer-term, inclusive Marketplace plans will potentially weaken the Marketplace by leaving only sicker, higher-cost individuals in the Marketplace plans. This will cause premiums to rise in Marketplace plans, pushing even more healthier, lower-cost consumers to STLDI plans.
This is where the suit recently filed by the seven advocacy organizations comes into play.
The plaintiffs are trying to block the implementation of this rule, arguing that 364 days, along with 36 months of renewal, violates the common sense meaning of short-term.
They also argue that the Trump administration should not be able to roll back an Obama-era regulation without better justification.
It will be interesting to see how this case develops. Increasingly, there is an awareness that regulatory agencies often ignore the feedback given by the public during the required notice and comment period for regulatory rule-making.
This is important because so much of our policy and governance is done via the administrative state. In Stewart v. Azar, a court was willing to hold the Department of Health and Human Services accountable for not being sufficiently responsive to the public comments it received on its proposed rule. Should this case come out along similar lines, it will be another interesting development in administrative law. A line of cases in this vein would make it clear that the courts are increasingly acting to check the regulatory state and hold them accountable to public input.