HHS in a fact sheet issued Wednesday said that some insurers "are now offering short-term limited duration plans to consumers as their primary form of health coverage for periods that last nearly 12 months, allowing them to target only the healthiest consumers while avoiding consumer protections."
"As highlighted in recent press accounts, by keeping these consumers out of the ACA single risk pool, such abuses of limited duration coverage increase costs for everyone else, and they could have a greater impact over time if allowed to become more widespread.
"The proposed rule also improves transparency for consumers by requiring issuers to provide notice to consumers that the coverage is not minimum essential coverage, does not satisfy the health coverage requirement of the ACA and will not prevent the consumer from owing a tax penalty," the fact sheet said.
"The proposed changes will help strengthen the risk pool by ensuring that short-term limited duration plans are used only as intended, to fill truly temporary gaps in coverage."
Clare Krusing, a spokeswoman for the trade group America's Health Insurance Plans, when asked about the proposal said, "We will be reviewing those details with our members."
Bruce Telkamp, co-founder and CEO of AgileHealthInsurance.com,a leading marketplace of short-term plans, said, "We hope that HHS listens to the voice of the consumer during the comment period for the proposed rule and preserves the existing options that short-term plans provide to millions of Americans who missed the Affordable Care Act enrollment period or simply cannot afford government marketplace plans."
"It is in the public interest to have a vibrant short-term market rather than have consumers face the substantial financial risks associated with being uninsured," Telkamp said.
Kev Coleman, head of research and data at the insurance price comparison site HealthPocket.com, said that, "It seems like HHS is very concerned about competition" from short-term plans for Obamacare plans, "and very worried about the 2017 rate hike."
Coleman, whose company is owned by the parent company of AgileHealthInsurance, said, "My question is how consumers are going to react to these proposals."
He said the short-term market is relatively small, and largely unknown to many consumers. "The people that are shopping [for short-term plans] are motivated by price," Coleman said. "There's a big price difference between the term market and the ACA market."
If HHS sharply limits the amount of time people can have short-term coverage, he said, some consumers will look at the higher premiums and deductibles of Obamacare plans and decided they can't afford them, or would rather not pay the higher prices.
"You're eliminating that option" — short-term coverage — "but you're not addressing the consumer issue that drove them into the market," he said of HHS' proposed rule.
Coleman added that the irony would be if HHS, which has tried to get more people health coverage, implemented a rule that led some people with short-term coverage to drop out of the health insurance market altogether by limiting their time on the plans. That would mean that they would not be added to, and potentially improving, the risk pools of Obamacare plans.
"I don't know if this is really going to solve the problem that HHS is trying to address," he said.