Judge Preserves 3 Year, Renewable Short-Term Health Plan Rule

July 22, 2019 - Federal Judge Richard J. Leon recently ruled in favor of an HHS final rule issued in August 2018 that made short-term health plans renewable for up to 36 months.

Short-term, limited-duration health plans—which are exempt from ACA’s individual health insurance stipulations—attract generally a healthy, younger constituency that is looking for a more affordable health plan than the ACA exchange.

The plaintiffs, who are in favor of keeping the plans at 12 months and nonrenewable, fear that letting health consumers remain on more affordable, short-term health plans for a longer period of time will lead to higher premiums on the ACA marketplace, Katie Keith, JD, MPH, recently explained on the Health Affairs blog.

The plaintiffs argued that the wording of the original HIPAA rule precludes anything other than a 12-month, nonrenewable timeframe for short-term health plans.

In his memorandum opinion, Judge Leon found that Congress did not create HIPAA with definite characteristics for a short-term health plan and HHS and other federal departments have defined characteristics using their own judgment without drawing critique from Congress for doing so.

Much like the questions judges posed in the recent Texas v Azar hearing about the constitutionality of the individual mandate, Judge Leon held it is Congress’ responsibility to make clear their intent and unless the policymakers further specified their language, he did not believe “short-term” was meant to imply solely 12 months.

"Congress, had it been so inclined, knew how to impose a 3-, 6-, or 12-month limitation,” he wrote. "It did not, and I cannot simply ignore the legislature’s choice to use indefinite, flexible phraseology. That is not to say that plaintiffs’ view is an unreasonable one. The ‘standard’ length of a benefit period would be a perfectly sensible benchmark for interpreting ‘short-term’ insurance. However…the ‘short-term’ modifier, without more, fails to communicate unambiguously a specific temporal limitation.”

Further, Judge Leon held that the most natural reading of “duration” did not imply just one term but instead allows for a reading which included renewals.

Lastly, Judge Leon determined that the context of HIPAA and ACA do not preclude the new definition of “short-term, limited duration.” He stated that, in the first example, HIPAA protected unbroken “creditable coverage,” which includes short-term, long-duration health plans. In the second, when the plaintiffs equated “short-term, limited duration” and “short coverage gaps,” a term used elsewhere in the ACA, he found no grounds to draw such a parallel.

HHS issued the final rule in response to President Trump’s 2017 executive order to expand short-term, limited-duration insurance availability. The administration suggested allowing a longer coverage period with the possibility of renewal “to the extent permitted by law and supported by sound policy.”

Companies offering short-term health plans have earned a poor reputation, Congress found in March 2019. Many short-term health plan issuers failed to educate or misled their members and their health plans often had significant coverage gaps, the investigation showed.

Some argue that, since short-term health plans are not subject to ACA’s individual health insurance regulations, the rule gives insurers a loophole to bring back pre-ACA insurance practices.

The coverage gaps created by these short-term health plans can lead to situations such as one experienced by an individual whom lawmakers cited in Congress’s March 2019 probe. The individual’s cancer treatment bills left him $800,000 in debt when his short-term health plan denied coverage. The insurer claimed the cancer was a “pre-existing condition,” even though he was diagnosed after starting the plan.

According to Keith, the plaintiffs plan to appeal to the Supreme Court.