This week, Washington State Insurance Commissioner Kreidler released a proposed rule that would limit the use of short-term, limited-duration health insurance plans. (here) There is a lot of confusion as to what these plans can and can not do and why they are potentially important for millions of Americans.

As background, these plans have been available for over 20 years. They were originally designed for people transitioning between other health plans, for example a person moving from one employer to another, or from employer-paid insurance to Medicare. They cover major medical problems, but are not required to include government-mandated benefits.

The Obama Administration limited their use to 90 days. The Trump Administration recently extended their use to 364 days, with the potential for renewal an additional two years. (here)

The basics of short-term, limited-duration health plans are:

• Guaranteed major medical health insurance coverage for 12 months.
• Allows an individual to enroll in an Obamacare plan at the end of the 12 months.
• Stable insurance premiums for a year, rather than every three months.
• Renewable for a total of three years.
• No health underwriting for the 12 month enrollment period – in other words, if a person becomes ill during the 12 month period, the plan can not be cancelled.
• The insurance company must be very clear that the plans do not necessarily include specific benefit mandates and may not cover pre-existing conditions.
• The administration of the plans is left up to the states.

Commissioner Kreidler’s rule would:

• Limit the duration of the plan to three months.
• Not allow renewability.
• Require enhanced disclosure language.
• Require an insurance company offering plans in this market to offer at least one plan with a $2,000 or less deductible.
• Limit any pre-existing condition look-back to two years.

Another objection to these plans is that they do not necessarily cover pre-existing conditions. Yet by current law, low-income people can enroll in Medicaid, or if they earn less than 400 percent of the federal poverty level, they can enroll in the Obamacare exchange with substantial taxpayer premium subsidies. (A better long term solution for people with pre-existing conditions would be high-risk pools.) (here)

The fundamental problem with health insurance is that it does not function like true risk-mitigating insurance in other areas of our lives. (here) When a person says they have “great health insurance” what they really mean is their insurance covers all of their health care needs, not simply major health events. The analogy would be auto or home owners insurance that would cover putting gas in the car or mowing the lawn.

It is the government that has distorted the health insurance market. Half of all Americans receive their health insurance from their employer or their spouses’ employer. The federal government gives these employers a substantial income tax break for providing this insurance. Over 40 percent of Americans receive their health insurance directly from the government through the Medicare, Medicaid, and Obamacare programs.

The solution would be to remove the third-party payers (employers and government) of health insurance and allow people to purchase insurance in a robust, national, individual market place – just like they do for auto or home owners insurance.

Commissioner Kreidler’s rule, while attempting to protect the consumer, actually reduces the health insurance choices for thousands of Washingtonians who have either been priced out of the market or who have made the decision that currently available plans do not meet their needs. Short-term, limited-duration plans are a very reasonable health insurance solution for many uninsured individuals.