GAO Report Neglects to Mention the Cruelty of Limiting Short‐​Term Plans

By Michael F. Cannon of Cato. 

"The Government Accountability Office has published report examining “short‐​term, limited duration” health insurance (STLDI). (That’s what federal law calls such health plans. A better moniker would be “renewable term health insurance.”)

Congress exempts STLDI plans from all federal health insurance regulations. As a result, premiums are often 90 percent lower than ObamaCare premiums and ObamaCare’s preexisting‐​conditions provisions aren’t constantly making coverage worse for the sick in STLDI plans.

In 2016, the Obama administration arbitrarily limited the duration of STLDI plans to 3 months. In 2018, the Trump administration issued a final rule that allows initial STLDI contracts to last up to 12 months; allows enrollees to renew that initial plan for up to 36 months; and allows consumers to stitch together as many 36‐​month plans as they like using “renewal guarantees” that protect them from underwriting after enrollment.

The GAO predictably reports that there isn’t much data on STLDI plans and rehashes the usual he‐​said/​she‐​said arguments from STLDI opponents and supporters.

But the report omits several dimensions of this issue that deserve attention. The case of near‐​elderly Arizona resident Jeanne Balvin illustrates many of those dimensions.

1. STLDI allows consumers to purchase coverage when ObamaCare denies them coverage. In April 2017, ObamaCare denied Balvin coverage. Outside of limited enrollment periods, ObamaCare denies coverage to everyone by blocking enrollment. Generally, ObamaCare denies enrollment and therefore coverage to patients for 9–10 months of the year. Balvin instead purchased an STLDI plan.
2. Limiting STLDI‐​plan durations and renewals strips consumer protections and coverage from the sick and exposes them to medical underwriting. Balvin soon required emergency surgery for diverticulitis. (Her STLDI plan paid promptly and fully for her hospital care.) At the time, federal rules required her insurer to cancel rather than renew her STLDI plan after three months. Those rules subjected Balvin to underwriting when she went to purchase a subsequent three‐​month plan, which meant that plan would not and could not cover her second hospitalization for a related condition. Those federal rules left Balvin to face $97,000 in hospital charges with no insurance. The NAIC foretold this consequence of limiting STLDI‐​plan durations and renewals. Those who seek to limit STLDI are literally trying to deny consumer protections and coverage to the sick.
3. ObamaCare does deny coverage to patients with preexisting conditions. Again, Balvin is an example. When federal rules stripped her of her STLDI coverage in June 2017, ObamaCare continued to deny her coverage. This point requires emphasis: ObamaCare denies enrollment outside of limited periods specifically to deny coverage to the sick, not the healthy, because it is the sick who drive adverse selection.
4. ObamaCare insurers are seeking to block competition from STLDI plans, and harm patients like Balvin, for greed. ObamaCare‐​participating insurers have admitted in federal court that they seek to limit consumer protections in STLDI plans—and thereby to subject STLDI enrollees like Balvin to medical underwriting, coverage denials, gaps, and cancellations, denial of medical care, expensive medical bills, and potential bankruptcy—specifically to increase their own revenues.
5. STLDI can reduce ObamaCare premiums. Current federal rules allow STLDI issuers to renew such plans indefinitely (the GAO report mentions one insurer that does), including with pre‐​ObamaCare renewal guarantees that enable enrollees who fall ill to keep paying healthy‐​person premiums. To the extent that patients like Balvin can remain in their plans after falling ill, STLDI plans will reduce ObamaCare premiums by keeping sicker‐​than‐​average patients out of the ObamaCare’s risk pools.
6. Current federal rules explicitly allow insurers to offer separate renewal guarantees that allow STLDI enrollees to maintain coverage indefinitely. See the 2018 final rule.
7. STLDI plans restore conscience rights. Federal law requires ObamaCare‐​compliant plans to cover forms of contraception that many consumers find morally objectionable. Another benefit of STLDI is that it allows those consumers to purchase coverage that aligns with their consciences.

Some resources that explain these dimensions in further detail:

• Comments on Short‐​Term, Limited Duration Insurance — CMS-9924‑P (April 2018; cited several times in the final rule)
• Short‐​Term Plans Would Increase Coverage, Protect Conscience Rights & Improve ObamaCare Risk Pools (July 2018; cited in the final rule)
• Californians deserve access to short‐​term health insurance (September 2018)
• Callous Ideologues: Illinois Legislators Pass Law to Punish Patients with Preexisting Conditions (November 2018)
• Amicus brief in Association for Community Affiliated Plans v. U.S. Dept. of the Treasury (January 2020)
• In a Win for Consumers, a Court Ruling Affirms the Legality of Short‐​Term Health Insurance Plans (July 2020)
• Obamacare Makes Discrimination against Those with Preexisting Conditions Even Worse (December 2020)

There’s a lot more going on with STLDI than either the GAO report or the public debate capture."