Trump administration finalizes rule to extend short-term insurance plans

The Trump administration is allowing short-term insurance plans to extend up to three years, according to a final rule issued Wednesday, Aug. 1.

The rule, originally proposed in February, allows the renewal of short-term, limited-duration plans to cover an initial period of less than 12 months, with a maximum duration of 36 months, including any extensions.

Short-term plans currently cover a period of less than three months with no renewal options. The plans were originally created as temporary healthcare coverage for those transferring insurance, such as individuals between jobs or students taking time off from school, according to HHS. The agency has also promoted these plans as an alternative option for middle-class families that aren’t eligible for subsidized health insurance on the marketplaces.

Short-term plans allow insurers to charge significantly lower premiums for coverage that is exempt from ACA requirements. Critics argue the plans offer significantly less coverage and lack protections for consumers, including limits on out-of-pocket expenses and guaranteed coverage for those with pre-existing conditions.

"There's so little regulation of these products. It's a buyer beware situation" Sabrina Corlette, research professor at the Center on Health Insurance Reforms at Georgetown University, told CNBC. "Some of them are truly junk insurance."

The expansion of short-term plans could also contribute to rising premiums on the ACA individual marketplace in 2019, as healthier individuals could opt for less coverage and cheaper plans, according to a recent analysis from the Kaiser Family Foundation.

HHS maintains the plans provide consumers greater access to more affordable options. The average monthly premium for an individual with a short-term, limited-duration policy at the end of 2016 was about $124, compared to $393 for an unsubsidized individual market plan, according to HHS.

“Under the Affordable Care Act, Americans have seen insurance premiums rise and choices dwindle,” HHS Secretary Alex Azar said in a statement Wednesday. “President Trump is bringing more affordable insurance options back to the market, including through allowing the renewal of short-term plans. These plans aren’t for everyone, but they can provide a much more affordable option for millions of the forgotten men and women left out by the current system.”

Three states—New York, New Jersey and Massachusetts—have banned such plans, and several other states have imposed restrictions on them, according to Bloomberg.

Insurers are required to notify enrollees that their policies may offer limited benefits or exclude pre-existing conditions. Once the plans become more widely available and continue to expand, CMS estimates an additional 1.6 million people may sign up for them. At the end of 2016, about 160,600 people were covered by short-term health insurance plans, Bloomberg reported.