New Short Term Medical Plan Rules Finalized

Short Term Medical Plans can now have an initial coverage period just shy of one year.

img
Published August 7, 2018

Last week, the Trump administration issued final rules which extend the maximum duration of short term medical plans (STM plans). STM plans can now have an initial coverage period just shy of one year (364 days). Taking into account renewals, STM plans can have a maximum duration of up to 36 months.

STM plans are exempt from the Affordable Care Act (ACA) market reforms. These plans can use preexisting conditions to determine eligibility for coverage, and they don’t have to cover essential health benefits. These exemptions make the premiums for STM plans lower. According to a recent press release from the Centers for Medicare and Medicaid Services (CMS), the average monthly premium for an individual in the fourth quarter of 2016 for a STM plan was approximately $124, compared with $393 for an unsubsidized individual market plan.

“We continue to see a crisis of affordability in the individual insurance market, especially for those who don’t qualify for large subsidies,” said CMS Administrator Seema Verma. “This final rule opens the door to new, more affordable coverage options for millions of middle-class Americans who have been priced out of ACA plans.”

Critics aren’t buying this message though.

The Obama administration had limited the maximum duration of STM plans to 90 days so that more individuals would purchase comprehensive health insurance with coverage protections of the ACA, including coverage for essential health benefits and the prohibition of denying someone coverage based on their health status.

Critics believe the ACA individual market will destabilize because of the new rules. There’s a belief that the young and/or healthy population will flock towards STM plans, leaving the ACA individual market to cover the old and/or unhealthy population. If this is true, it would be expected that premiums for plans in the ACA individual market will go up and choices will go down. States may also step in and respond to the new rules, and several already have.

States concerned with the new rules can pass laws which circumvent the Trump administration rules. States can mandate certain benefit requirements, limit durations of coverage and prohibit the use of underwriting, among other things.

The new STM plan rules will take effect this October, just a few weeks before the 2019 ACA open enrollment period is set to begin. It will be interesting to see how this all shakes out.