Aetna Short-Term Plans Rekindled After Regulatory Changes

Aetna reentered the short-term healthcare market after Congress and the Trump administration eased rules making temporary policies more attractive to consumers. Aetna short-term plans found new life in the fall of 2017, when the company evaluated its approach ahead of changes in the Affordable Care Act (ACA).

“We are actually looking at reenergizing a program we had prior to the [ACA] but… short-term, one-year kind of plan, or transition plan… So we have to think of what kind of plan it would look like and offer it as a transitionary plan over a year.”
-Aetna Chairman and CEO Mark T. Bertolini, speaking during the company’s third-quarter 2017 earnings conference call

Aetna’s October 31, 2017 communication to investors was a sign of major changes about to happen in the healthcare sector and of Washington’s commitment to reform healthcare for beleaguered consumers.

Washington Eased Restrictions

Donald Trump signed an executive order directing his administration to expand access to short-term healthcare policies, which had been severely restricted under the Obama presidency. The rule had limited short-term plans to a term of 90 days, and they didn’t qualify as government-compliant coverage.

Under the new order, insurers were permitted to sell policies with a term of up to 364 days. Temporary health plans were also allowed to be renewed for up to three years.

Known as short-term limited duration insurance (STLDI), these temporary plans were primarily intended for people between jobs or waiting for “Open Enrollment,” the annual period when consumers could sign up for healthcare under the ACA. Many consumers sought the plans as a bridge to cover periods when they were without insurance such as when they were awaiting Medicare to begin or immediately following a divorce.

Trump’s order would allow short-term policies to be offered in counties where few insurers were participating in the exchanges or by those who missed open enrollment. Many consumers saw short-term plans as a better option than the ACA’s major medical coverage, which many times offered benefits they neither needed nor wanted.

Consumers Benefit

Traditionally, these temporary plans cost about one-third of traditional major medical coverage found on marketplace exchanges. The cost difference is largely due to the policies’ reduced benefits that don’t meet Obamacare’s “minimum essential” coverage (MEC).

Plans that are ACA-compliant meet established limits on deductibles, copayments, and out-of-pocket maximum amounts. In addition to covering a wide range of services, enrollees in an Obamacare plan cannot be rejected for preexisting conditions.

These plans were robust in coverage and came with hefty premiums to match. Many consumers who participated in the government-compliant healthcare programs complained about rising premium costs.

In October 2017, the Department of Health and Human Services (HSS) reported that premiums for the second lowest silver-level plan on the marketplace exchanges would be rising an average of 37 percent for 2018. Those same plans are expected to continue to increase seven percent each year through 2028.

But higher premiums weren’t the only objection. Consumers were unhappy about disincentives built into Obamacare.

One of the most controversial provisions of the ACA was the “individual mandate,” which penalized consumers who didn’t purchase insurance policies that met government guidelines and couldn’t qualify for an exemption. In 2017, lawmakers passed the Tax Cut and Jobs Act with a small but important provision that repealed the mandate.

Consumers found the plans to be more affordable, but critics are worried that they may not understand the limits of their coverage. Additionally, individuals can be rejected for a preexisting condition under a short-term plan, something that couldn’t happen under Obamacare.

New Direction

In May 2017, Aetna announced it would pull out of the ACA marketplace exchanges the following year. The announcement came as a blow to Obamacare supporters as the insurance giant joined an exodus of companies leaving state exchanges.

“Aetna’s decision to completely withdraw from the Obamacare exchanges adds to the mountain of evidence that Obamacare has failed the American people. Repealing and replacing it with patient-centered solutions that stabilize the marketplace to bring down costs and increase choices is the only solution,” said Tom Price, Health and Human Services Secretary at the time. (Price resigned in September 2017.)

This decision came after Aetna reported that its commercial products lost nearly $700 million between 2014 and 2016. The company had projected to lose more than $200 million in 2017—partly due to the deterioration of the risk pool.

The intent to offer Aetna short-term plans is seen as a positive sign for the company and an indication that consumers will see greater options being offered in temporary plans. We’ll bring you more information about Aetna short-term plans as it becomes available.

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