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Short-term Plans

 

The Problem

As of early August, the Trump administration approved major changes to short-term limited duration health plans and association health plans (AHPs), both of which are exempt from the major provisions of the ACA. 

Short-term plans are attractive to young, healthy people because of their low premiums, but were originally meant only to cover short gaps in coverage. The Obama administration narrowed STLDs to a 3-month maximum duration; under the new policy, they can last up to 3 years with approved extensions.

Potential Impacts for New Mexico

Market Fragmentation

Young, healthy people, now not facing a penalty for failure to maintain coverage, will be attracted to the low premiums offered by short-term plans and pull out of the current individual market, fragmenting and destabilizing the market.

Diminished Risk Pool

The risk pool of the individual market will suffer from the loss of these low-cost individuals, driving up out-of-pockets costs for those who remain.

Inadequate Coverage

There is a risk that individuals who sign up for short-term plans are doing so without being fully informed about the scope of their coverage. Those who do qualify for and purchase short-term plans will find that if they need medical services, their plans will not adequately cover them, or the costs will be prohibitively high.

The Solution

Utilizing the broad authority given to states to regulate STLDs, create policy that limits the timeframe of the plans and ensures transparency of their coverage and costs. These regulations can replicate the previous federal rules, or can be further tailored to New Mexico’s insurance landscape. 

Policy Status

Legislation regulating short-term plans passed through the NM legislature during the 2019 session and was subsequently signed by Governor Lujan Grisham. The regulations are now being written into the state's insurance code. For more information, please email

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