Washington’s Insurance Commissioner Rolls Back Federal Attempt to Expand Access to Short-Term Health Plans

On October 17, 2018, the Office of the Insurance Commissioner (“OIC”) adopted a final rule that defines minimum standards for short-term limited-duration health insurance plans (“short-term plans”) in Washington State and rejects federal efforts to expand their availability. Short-term plans are exempt from many of the minimum requirements applicable to most health plans under the Affordable Care Act (“ACA”) and Washington State law. The OIC rulemaking is a direct response to recent federal changes that removed many restrictions that previously curbed access to short-term plans. See our previous post for more information on the federal rule, which went into effect October 2, 2018 and is expected to result in a dramatic increase in the use of short-term plans.

Federal rules now allow short-term plans to cover an individual for up to 364 days in a year, and make it possible for someone to have short-term plan coverage for up to 36 months by using consecutive plans, all while side-stepping consumer protection requirements such as essential health benefits and the prohibition on exclusions for preexisting conditions. The new OIC rules would basically roll back these federal changes in Washington State, making it clear that short-term plans are not a viable alternative to more traditional insurance coverage.

The final rule:

• Limits the duration of any short-term plan to three months, including any renewal period.
• Prohibits a carrier from issuing a short-term plan if it would result in more than three months of coverage under a short-term plan in the same 12-month period. In other words, a consumer could not cobble together multiple short-term plans to cover more than the three-month limit.
• If preexisting conditions are excluded, limits the lookback period to up to 24 months prior to the application date.
• Requires minimum benefit coverage, including hospital, surgical and medical expense coverage of at least one million dollars, and a copayment or coinsurance of not more than 50%.
• Prohibits the issuance of a short-term plan during open enrollment for individual coverage on the Washington State health benefit exchange.
• Requires that potential enrollees be given a standard disclosure form, acknowledged by their signature, describing the limits of the coverage being offered. The disclosure must include specific language advising of the short-term plan’s limited nature, including that it may not cover preexisting conditions and that it does not include benefits required by the ACA. The disclosure then provides details about the timing, duration and extent of the coverage.
• Requires OIC approval for any short-term plan, which may be withdrawn at any time for cause.
• Is applicable to plans with an effective date on or after January 1, 2019.

The OIC acknowledges that short-term plans should be available as a stop-gap option for consumers who seek health coverage for a short period of time until more permanent health insurance may be obtained. With these rules, however, the OIC has largely restored the limitations which existed prior to the recent federal changes. The move sends a signal to carriers and consumers that any attempt to circumvent consumer protections or to use short-term plans as a long-term alternative to the traditional individual market will hit a roadblock in Washington State.