Policy Initiatives:

Short-Term Health Plans, Long-Term Benefits:
States that Allow Short-Term Coverage Have Stronger Health Insurance Markets

The Biden administration should withdraw

its proposed rule to restrict STLDI.

Executive Summary

What This Paper Covers

In 2018, the Trump administration liberalized federal requirements around short-term limited-duration health insurance (STLDI). In a 2021 analysis, I found that states that maximally permitted STLDI had more favorable trends in their individual insurance market relative to states that restricted or prohibited STLDI from 2018 to 2020. Affordable Care Act (ACA) plan enrollment, insurer participation, and premium trends were all better in STLDI favorable states. This paper uses years of additional data to evaluate whether those trends continued.

What We Found

The ACA individual market, regardless of metric, has performed better in states that fully permit STLDI. Between 2018 and 2023: 1) Exchange enrollment was up 62.7 percent in STLDI favorable states, more than 13 times greater than the 4.7 percent increase in STLDI unfavorable states; 2) The number of insurers selling exchange plans in STLDI favorable states increased 105 percent, more than three times the 32 percent increase in STLDI unfavorable states; and 3) Exchange plan premiums, particularly for benchmark plans and gold plans, decreased much more significantly in STLDI favorable states.

Why It Matters

In July, the Biden administration proposed a rule to significantly reduce the allowable STLDI contract period. The rule would change the allowable initial contract period from 364 days to three months and would change the total permissible duration of a plan from three years to four months. If the administration finalizes this rule as proposed, it would create numerous harms, including reducing coverage options, stripping coverage from people who get sick and lack access to other plans, and increasing the number of people without health insurance. This study suggests that the proposed federal STLDI restrictions are more likely to harm, rather than improve, the ACA market.

Policy Suggestions

This paper provides further evidence that the Biden administration should withdraw its proposed rule to restrict STLDI. The costs of such restrictions would dwarf any benefits.

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Paragon Health Institute (PHI) is a non-partisan, not-for-profit policy research institute. Any views, beliefs, or opinions expressed by PHI’s Public Advisors are those of its Advisors and do not necessarily reflect the official policies or positions of PHI or its employees. Any views, beliefs, or opinions expressed by PHI or its employees belong solely to PHI and do not necessarily reflect those of PHI’s Public Advisors.