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Federal regulator proposes extending short-term health plans to 12 months

The U.S. Department of Health and Human Services has released a proposed rule aimed at further loosening health insurance market restrictions imposed by the Affordable Care Act.

The proposal would extend the amount of time short-term, limited-duration health insurance plans can cover individuals from the current three months to a full year, giving the plans the same coverage period as regular policies.

Short-term plans are designed to provide coverage for people who are between jobs or awaiting ACA open enrollment, or for any time a three-month plan is needed. The plans are not required to offer a minimum set of benefits mandated by the ACA and can turn down consumers with pre-existing conditions.

Under the rule, short-term plans would require insurers to include a disclaimer stating that the plans do not need to comply with federal health insurance requirements. "This coverage is not 'minimum essential coverage,'" the proposed disclaimer states. A consumer could be liable for paying a fee when filing taxes if he or she goes without minimum essential coverage for any month in 2018.

The public has 60 days to comment on the proposed rule before it is finalized by the department.

The rule follows an executive order from President Donald Trump directing agencies and departments to promote "healthcare choice and competition" through three actions. The first was a proposed rule to allow individuals to unite and purchase small-group health insurance plans known as association health plans. The second is the extension of short-term, limited-duration plans, and the third is expected to be loosened rules around health savings accounts.

Kristine Grow, senior vice president of communications at America's Health Insurance Plans, wrote in a statement that the health insurance lobbying group is "concerned" that expanded use of short-term policies could "further fragment the individual market, which would lead to higher premiums for many consumers, particularly those with pre-existing conditions."

EHealth Inc. CEO Scott Flanders said in a statement the proposal would give consumers a “valuable measure of protection at an affordable price."

Flanders wrote that premiums for the ACA plans the company sells are about 4x more than those of its short-term plans. The company's average monthly premium is $110 for individuals and $267 for families for short-term plans. In comparison, the average monthly premium for ACA-compliant major medical health insurance plans is $440 for unsubsidized individuals and $1,168 for families.

Sean Malia, senior director of carrier relations at eHealth, noted that short-term plans do not offer the same benefits as major medical plans and are thus less expensive.

He wrote the company is “committed to explaining to consumers precisely what they are and are not buying.”