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The Crackdown on Short Term Policies

The use of short term insurance policies, those that extend for only a few months (though are renewable), has risen since the Affordable Care Act’s full implementation in 2014.

These plans have recently been used as a means for mostly healthy consumers to access health insurance without the costs associated with marketplace plans. To acquire a short term policy, it is necessary to prove general good health a lack of pre-existing conditions. The low cost appeals to a healthy population that does not see the need for the full range of coverage offered under the ACA.

These plans do not meet Minimum Essential Coverage mandates, and they often cover far less than the typical marketplace plan, with most prescription drugs exempted from coverage, but for a healthier population, the cost savings speak for themselves, even with the fines associated with non-approved health insurance policies.

The Obama administration proposed a crackdown on such plans with a new proposal on Wednesday. Under this proposed rule, insurers offering short term policies would be required to limit their duration to under three months, with no further options for renewal.

The goal would be to encourage healthier people to join the marketplace and access plans meeting MEC mandates, with this healthy population being a decisive factor in the success of the marketplace as a whole. Without their participation, the more extensive claims from a more unhealthy population cripple the ability of insurers to provide comprehensive plans and lower premiums.

This proposal also seeks to limit the ability to enroll during Special Enrollment Periods, with insurers citing the fact that consumers tend to seek coverage when needed, and without sufficient evidence of Qualifying Events, which creates further problems in cost management for the health insurance industry. More extensive evidence will be needed for Qualifying Events moving forward, should this proposal pass.