On September 6, 2023, TCF health care policy fellow Thomas Waldrop submitted the following public comment to the U.S. Department of Health and Human Services (HHS) in response to their notice of proposed rulemaking (NPRM), “Short-Term, Limited-Duration Insurance; Independent, Noncoordinated Excepted Benefits Coverage; Level-Funded Plan Arrangements; and Tax Treatment of Certain Accident and Health Insurance” (file code CMS–9904–P). In his comment, Waldrop highlights the benefits of comprehensive coverage over short-term, limited duration insurance, as well as the meaningful changes in affordability that have occurred since the Trump administration issued its rule expanding access to short-term, limited duration insurance plans. He ends by urging the Biden administration to take steps to ensure that patients do not become uninsured as a result of the proposed rule’s restrictions on short-term plans.

I am pleased to provide comments to the Centers for Medicare and Medicaid Services’ (CMS’) request for public input on the notice of proposed rulemaking (NPRM), “Short-Term, Limited-Duration Insurance; Independent, Noncoordinated Excepted Benefits Coverage; Level-Funded Plan Arrangements; and Tax Treatment of Certain Accident and Health Insurance,” file code CMS–9904–P, on behalf of The Century Foundation (TCF).

My name is Thomas Waldrop and I serve as a health care policy fellow at The Century Foundation, a progressive independent think tank. The Century Foundation works to create a health care system that advances health equity by supporting the right to access needed care free of structural barriers. The team focuses on issues related to health coverage, reproductive rights and justice, maternal health equity, racial and gender disparities in health outcomes, and the intersections between health care and economic justice.

Short-term, limited duration insurance (STLDI) is a form of major medical health coverage meant to fill temporary gaps for consumers between coverage sources. Unlike many forms of insurance, however, STLDI plans are not required to cover essential health benefits under the Affordable Care Act (ACA), nor are they subject to the ACA’s consumer protections. Despite this, many people are using these plans to replace comprehensive coverage.

This use of STLDI plans to replace comprehensive health coverage stems in part from the Trump administration’s 2018 rule regulating these plans. Under the previous rule, which this proposed rule would replace, consumers could enroll in STLDI for up to twelve months and renew them for up to three years; this cycle has contributed to the perception of these plans as replacements for comprehensive coverage. The Biden administration’s proposed rule would restrict these plans to being truly short-term and ensure that patients are not misled into thinking that STLDI is a replacement for comprehensive coverage. However, the administration should take steps to ensure that patients do not become uninsured as a result.

Short-Term Plans Don’t Replace Comprehensive Coverage

Underpinning the need to regulate STLDI plans is the fact that they do not provide a meaningful source of comprehensive health coverage. For example, STLDI plans often do not cover services such as prescription drugs or maternity care, and these plans are able to deny coverage or charge much higher premiums based on pre-existing conditions. The Kaiser Family Foundation estimates that the average additional health costs associated with pregnancy are nearly $19,000, emphasizing the gulf in affordability these plans could saddle patients with if they don’t have maternity coverage. After the Trump administration’s rule was finalized, around 3 million people were enrolled in STLDI plans, up by around 600,000 people from before the rule, suggesting that these more lax regulations drove enrollment.

Even worse, STLDI plans do not provide opportunities for patients to enroll in comprehensive coverage if they are disenrolled. When a patient loses comprehensive health coverage, they can enroll in other sources of coverage, even if their loss of coverage doesn’t occur during open enrollment. Because STLDI are not “qualifying coverage” under the ACA, however, they do not trigger this opportunity if they lose this coverage, whether it’s because the issuer terminates their coverage outright or their policy expires. This can result in patients being denied coverage for services related to a pre-existing condition and unable to obtain comprehensive coverage that helps them afford the care they need until the next open enrollment period, potentially saddling them with significant medical costs.

In addition to the substantive issues with STLDI plans, they also often rely on deceptive, aggressive marketing practices to drive their enrollment. For example, a 2020 report by the Government Accountability Office found that in around 25 percent of secret shopper calls, brokers used “potentially deceptive marketing practices,” such as making misleading statements about their plans or omitting pertinent information about health coverage.

This finding is echoed in research by experts at Georgetown University’s Center on Health Insurance Reforms. A 2018 survey found that STLDI brokers would often ask questions about health status, age, and income and would rarely agree to send written information about the plans being offered. A 2023 follow-up study found that little had changed: sales representatives often declined to send additional plan information, and none of the sales representatives spoken with mentioned the possibility of $0 premium marketplace coverage, which many of the consumer profiles were eligible for. The sales representatives would also often misrepresent plan benefits, such as describing a plan as covering “pregnancy-related care” despite it not covering labor and delivery costs.

The Trump administration’s justification for expanding the duration of these plans was that short-term plans were more affordable options for people who were not eligible for marketplace plan subsidies. This “better than nothing” approach ignored the value of comprehensive coverage at the time, and it is especially irrelevant now. The Biden administration has taken several steps to improve the affordability and value of marketplace plans in recent years.

This “better than nothing” approach ignored the value of comprehensive coverage at the time, and it is especially irrelevant now.

First, the American Rescue Plan Act of 2021 made marketplace subsidies newly available to millions of people, and it made those subsidies more generous for those already eligible. These subsidies were then extended through 2025 under the Inflation Reduction Act of 2022, making marketplace coverage more affordable for several more years. Additionally, the Biden administration has finalized rules fixing the so-called “family glitch,” as well as expanding access to birth control through marketplace plans. Together, these actions all make marketplace coverage more affordable and provide more benefit to patients, dispelling the Trump administration’s reasoning. More than 16 million people are enrolled in marketplace plans this year, significantly higher than the 11.75 million people enrolled when the Trump administration first proposed its rule in 2018.

The Proposed Rule Would Promote Meaningful Coverage

The proposed changes to how STLDI issuers can operate would make progress toward CMS’ stated goal of promoting “equitable access to high-quality, affordable, comprehensive coverage.” First, the rule reduces the initial contract length for such a plan to three months, significantly lower than the current twelve-month maximum. Similarly, the rule reduces the maximum total duration, including renewals and extensions, from thirty-six months to four months. The rule also restricts the ability of issuers to issue multiple, sequential STLDI policies within the same twelve-month period–a practice known as “stacking.” Together, these changes ensure that STLDI plans are truly short-term.

The proposed rule also changes the notice that STLDI issuers are required to include documents related to their policies. Current rules require issuers to provide a notice with any contract or application materials, and the proposed rule significantly improves upon this notice requirement. Under this proposal, notice is required to be on the first page of any policy, certificate, or contract, and it must be provided on marketing materials (including websites) and enrollment materials, in addition to applications and contracts. The new notice requirement would also require the notice to be in plain language, explicitly calling out the fact that these plans may not cover or limit coverage for pre-existing conditions, are ineligible for federal subsidies, and do not qualify the enrollee to enroll in comprehensive coverage outside of open enrollment.

The proposed shorter durations of these plans, notice requirements, and prohibition on stacking will all likely combine to push a significant portion of those currently enrolled in STLDI plans into comprehensive coverage. Shifting enrollment from STLDI plans to comprehensive coverage will not only benefit the patients receiving more meaningful coverage, but the entire risk pool. STLDI plans are disproportionately popular with healthier individuals; their exclusion from the risk pool likely drives up premiums for all enrollees. For example, the actuarial firm Milliman found that premiums for marketplace plans in states with looser STLDI regulations prior to the Trump administration’s final rule were around $25 a month more expensive, in part due to healthier populations leaving the risk pool. By further incentivizing a larger, healthier risk pool for marketplace insurers, all patients will likely see their premiums reduced.

CMS should take steps to ensure that these new rules do not have the unintended effect of net coverage loss, however. Particularly as the Medicaid continuous coverage provision of the Families First Coronavirus Response Act unwinds, promoting any source of coverage should be a priority, even if that coverage is less comprehensive than ACA coverage. CMS can achieve this goal through a variety of ways. First, the agency should conduct secret shopper surveys as GAO and academic researchers have in the past to ensure compliance with the new notice requirements, as well as to identify further areas for improved consumer clarity. Second, CMS should conduct surveys of enrollees in these and other plans to ensure that the new notice requirements are serving their intended purpose.

CMS should also work to uniquely promote marketplace coverage to those currently enrolled in STLDI plans, especially in the months leading up to the open enrollment period for 2024. In particular, CMS should pull from the plain language notice requirements for these plans to highlight the benefit of comprehensive coverage to these patients. Patients enrolled in STLDI plans may continue to believe their plan covers their health needs despite the new notice requirements, so implementing targeted marketing to reach these patients is especially critical during open enrollment.

In addition to marketing efforts, CMS should ensure that navigators are funded to have the capacity to help consumers make informed decisions as they enroll in marketplace coverage. CMS should also proactively enforce these requirements to ensure brokers are complying.

Comprehensive Coverage is Essential to Achieving Health Equity

Promoting universal coverage through plans that truly meet people’s health needs is more critical than ever, as millions of patients across the country are at risk of losing health coverage as part of the Medicaid continuous coverage unwinding. The proposed rule by the Biden administration will create a robust federal standard for how short-term, limited duration insurance plans can operate, and this new standard would help prevent patients from making disadvantageous decisions while they navigate the intentionally complicated U.S. health insurance system. Driving consumers from these plans into comprehensive coverage with the consumer protections of the ACA will benefit both the patients who have meaningful coverage as well as the entire marketplace population by lowering premiums through a healthier risk pool.