The Iowa Insurance Division has approved the sale of short-term limited-duration health plans, opening the door for more Iowans to obtain health care coverage outside the federal Affordable Care Act marketplace.
The state insurance regulator has approved the sale of two 364-day health plans by Golden Rule Insurance Co., a unit of UnitedHealthcare, and United States Fire Insurance Co., the Iowa Insurance Division announced Thursday,
These plans — one of which will be renewable for up to three years — are targeted to individuals who are priced out of the individual health insurance market through the ACA, the Obama-era marketplace.
“As the ACA individual health insurance market has become unaffordable for anyone not utilizing federal subsidies, Iowa has continued to work in common-sense ways to help provide options so Iowans have access to affordable health coverage,” Iowa Insurance Commissioner Doug Ommen said in a news release.
According to Iowa Insurance Division data, about 34,000 individuals dropped from the off-exchange individual market between 2016 to 2018. In addition, roughly 4 percent of Iowans were uninsured in 2017.
Each of these groups possibly could benefit from the proposed plans, insurance officials said.
Short-term, limited-duration coverage was created to fill gaps that occur when an individual is transitioning from one plan to another, such as those between jobs or young adults coming off their parents’ plan.
But according to the Iowa Insurance Division, ACA coverage has become so unaffordable for some that a federal change in the law was needed.
In August 2018, the U.S. Departments of Health and Human Services, Labor, and Treasury issued a final rule extending the duration of short-term, limited-duration insurance to 12 months and allowing insurers to renew or extend coverage for up to 36 months.
The rule reversed previous ACA law that capped these plans at three months.
This law went into effect on Oct. 2, 2018, according to the Federal Register.
The Iowa Insurance Division adopted administrative rules allowing these plans in Iowa earlier this year.
Golden Rule Insurance’s plan is renewable for up to three years.
The Iowa Insurance Division said these products should be entering the market “in the coming months at the carrier’s discretion.”
“Rates will vary by company and individual,” said Chance McElhaney, communications director for the Iowa Insurance Division.
“These types of plans may be an affordable option for those Iowans that are priced out of the ACA market, and Iowans should talk with a licensed insurance agent to see what would fit their individual needs and budget,” he said.
Additional 364-day short-term limited-duration health plans are “currently being reviewed” by the Insurance Division, officials said.
“Contrary to some national talking points, all short-term, limited-duration policies are not ‘junk’ plans,” Ommen said in the news release. “Every state has the authority to ensure minimum standards and consumer protections.
“Under Iowa’s administrative rules, short-term limited-duration policies are a viable health coverage option, especially for the many Iowa consumers priced out of the ACA individual health insurance market.”
According to the administrative rule, these plans must provide coverage up to an aggregate maximum of $500,000 for each initial or renewal policy term.
Services required under these plans include:
• Emergency room services
• Surgical services
• In- and out-of-hospital care
• Treatment for functional nervous disorders, mental and emotional disorders and substance use disorders
• Out-of-hospital prescription drugs and medications.
Ommen emphasized in his statement that any policy longer than six months in duration is required to provide preventive and wellness services.
“The need for options like 364-day short-term limited-duration plans comes from the structural flaws of the ACA, which the Iowa Insurance Division has continually called on Congress to address,” the release stated.
Ommen has long called for a fix of these “structural flaws,” which he said includes a lack of a predictable reinsurance mechanism, an income-only-based subsidy design and an age banding limitation.
These flaws raise the cost for some Iowans, driving them out of the market and leaving Iowans with persistent health conditions to pay high rates, Ommen said.
“Whether the ‘fix’ is amending the ACA, or replacing the ACA with a law by a different name with some of the same coverage guarantees, it is clear that something must be done,” Ommen said in the release.