REPORT MARCH 2018 State Regulation of Coverage Options Outside of the Affordable Care Act: Limiting the Risk to the Individual Market Kevin Lucia, Justin Giovannelli, Sabrina Corlette, JoAnn Volk, Dania Palanker, Maanasa Kona, and Emily Curran ABSTRACT KEY TAKEAWAYS ISSUE: Certain forms of individual health coverage are not required to “Alternative coverage comply with the consumer protections of the Affordable Care Act (ACA). arrangements” that are not required to comply with the These “alternative coverage arrangements” — including transitional Affordable Care Act’s consumer policies, short-term plans, health care sharing ministries, and association protections tend to have lower health plans — tend to have lower upfront costs and offer far fewer upfront costs but offer fewer benefits than ACA-compliant insurance. While appealing to some healthy benefits than ACA-compliant insurance. individuals, they are often unattractive, or unavailable, to people in less- than-perfect health. By leveraging their regulatory advantages to enroll Many of these alternative healthy individuals, these alternatives to marketplace coverage may coverage options, including contribute to a smaller, sicker, and less stable ACA-compliant market. The short-term plans and association Trump administration recently has acted to reduce federal barriers to plans, threaten the individual- these arrangements. market risk pool by siphoning off healthier enrollees, leaving sicker GOAL: To understand how states regulate coverage arrangements that do and costlier enrollees in ACA- not comply with the ACA’s individual health insurance market reforms. compliant plans. METHODS: Analysis of the applicable laws, regulations, and guidance of States may want to consider the 50 states and the District of Columbia. regulatory options for protecting FINDINGS AND CONCLUSIONS: No state’s regulatory framework fully their individual insurance protects the individual market from adverse selection by the alternative markets and their insured beneficiaries from the effects of coverage arrangements studied. However, states have the authority to alternative coverage products. ensure a level playing field among coverage options to promote market stability. State Regulation of Coverage Options Outside the ACA: Limiting Individual Market Risk 2 BACKGROUND the individual mandate. To prevent cherry-picking of Recent federal actions have created the potential for individuals who are low health risks, it also requires all instability in the individual health insurance market, individual market insurers to play by the same rules. through which approximately 18 million Americans In many ways, the ACA’s regulatory approach to the currently purchase their health insurance coverage.1 individual market has proven successful. During the In October 2017, President Trump issued an executive most recent open enrollment period, approximately order to encourage the sale of health insurance products 11.7 million Americans signed up for coverage through that do not comply with the consumer protections of the ACA marketplaces (also called exchanges), most of the Affordable Care Act (ACA).2 In December, Congress whom are eligible for subsidies to help with the cost of repealed, effective in 2019, the tax penalty for individuals coverage.5 In turn, improved access to comprehensive who can afford to maintain health insurance coverage but individual health insurance under the ACA, along with decline to do so (the individual mandate penalty).3 the expansion of Medicaid, has helped to reduce the Prior to health reform, insurers in the individual uninsured rate by a third, as of 2018, and lower consumers’ market had wide latitude to deny coverage, charge an average out-of-pocket costs.6 And, despite insurers’ unaffordable premium, or limit benefits based on a continued uncertainty over the possible repeal of the person’s medical history. As a consequence, individual health law and the Trump administration’s approach to market health insurance routinely proved inadequate implementing the ACA, analysis showed that, on average, for consumers’ health and financial needs and was often states’ individual markets were stabilizing, with some inaccessible to those with even minor health problems.4 insurers reaching profitability.7 The ACA established numerous consumer protections However, challenges remain. In the past two years, the designed to make it easier for consumers in the individual individual market in most states has seen significant market to access affordable, adequate health insurance. increases in premiums, coupled with decreases in the The law requires insurers that sell individual health number of participating insurers.8 While the ACA’s insurance to offer coverage to all individuals regardless of premium subsidies insulate many consumers from these health status, requires coverage of preexisting conditions, price hikes, many millions of consumers are not eligible and prohibits insurers from charging higher premiums for subsidies, and those individuals identify the cost of based on a person’s medical history or gender. It also coverage as a significant barrier to care.9 And though includes limits on cost-sharing and requires insurers marketplace sign-ups remain stable despite federal policy to cover a minimum set of essential health benefits, uncertainty and Trump administration actions seen as including coverage for mental and behavioral health care, undermining the ACA, enrollment remains well below prescription drugs, and maternity services. early expectations.10 For these consumer protections to work as intended and These challenges are interrelated and can be attributed to keep premiums affordable, they need to be paired to many factors. Still, the availability of coverage options with policies that encourage a broad and balanced risk that are not compliant with the ACA’s rules, as well as pool. To promote continuous enrollment by the sick and confusion over them, likely has played an important healthy alike, the ACA imposes an individual mandate contributing role (Exhibit 1).11 and provides financial assistance to make coverage more affordable for those with lower and moderate incomes. In general, “alternative coverage arrangements” sit outside Importantly, the ACA also defines what types of coverage the individual market risk pool and do not have to meet were sufficiently protective for purposes of satisfying many — or sometimes, any — of the federal consumer commonwealthfund.org March 2018 State Regulation of Coverage Options Outside the ACA: Limiting Individual Market Risk 3 Exhibit 1. Federal Framework Governing Alternative Coverage Arrangements in the Individual Market Type Description Policies issued following the ACA’s enactment in 2010 but before 2014. These “grandmothered plans” are not Transitional policies required to meet the ACA’s most critical consumer protections applying to the individual market.* Health plans designed to fill temporary gaps in coverage. Generally, short-term plans are available only to con- Short-term plans sumers who can pass medical underwriting. Typically they provide minimal benefits and financial protection for those who become sick or injured. These policies do not have to meet any of the ACA’s consumer protections. Health insurance plans sponsored by an employer-based association, such as a professional or trade group. New proposed federal rules would allow association health plans (AHPs), a type of Multiple Employer Welfare Association health plans Arrangement (MEWA), to be sold to employers of all sizes, including sole proprietors and the self-employed. The rule generally would treat the AHP as a large employer group plan for the purpose of federal law, rendering it ex- empt from ACA consumer protections that otherwise apply to individual and small-employer health insurance. Health care sharing ministries (HCSMs) are entities whose members share a common set of religious beliefs Health care sharing ministries and contribute funds to pay for the qualifying medical expenses of other members. HCSM coverage does not have to meet any of the ACA consumer protections. * Transitional policies are not to be confused with grandfathered policies, which were in effect before the ACA was enacted in March 2010. Although these policies can be renewed indefinitely as long as they do not undergo substantial changes, the issuance of a new grandfathered policy is not permitted. Data: Authors’ analysis. protections that otherwise apply to individual health “grandfathered” and “grandmothered” (or transitional) insurance (Exhibit 2). While these arrangements may plans, are a product of the ACA or of its implementation. be appealing to some healthy consumers, particularly Association health plans (AHPs) predate the ACA. Shortly because of their generally low upfront cost, they are after the health law was enacted, federal regulators typically far less protective than coverage compliant with affirmed that such plans are generally treated as individual the ACA and therefore less attractive, and less accessible, market coverage, subject to all individual market to individuals who believe they will need medical care. protections, if the plans are sold to individuals. The Trump These coverage products siphon off healthy individuals administration, however, has proposed a reinterpretation who otherwise likely would have obtained insurance in of federal law that would exempt certain AHPs from many the ACA-compliant individual market. As a result, they individual market protections, even when marketed to contribute to a smaller and relatively sicker risk pool in individuals. that market, with higher premiums and fewer plan choices The administration’s actions to further encourage for the consumers who remain. Although states have the availability of non-ACA-compliant polices, along broad authority and ability to regulate these coverage with the loss of the individual mandate penalty, have arrangements, most generally do not. sparked interest in how these alternative coverage Some of these coverage options, including short-term arrangements are regulated at the state level. To inform policies, health care sharing ministries, and other state policymakers who are exploring opportunities to insurance-like arrangements, such as discount cards stabilize their risk pool, we identify and describe a number and direct primary care contracts, were generally of alternative coverage options that are likely to threaten not considered individual market health insurance the individual market risk pool. We also examine the legal prior to the ACA and were not brought within the framework within which these arrangements are currently federal definition by the health law. Others, including regulated, both federally and in each of the states. commonwealthfund.org March 2018 State Regulation of Coverage Options Outside the ACA: Limiting Individual Market Risk 4 Exhibit 2. Key Individual Market Reforms Under the Affordable Care Act: Applicability to Alternative Coverage Arrangements Associa- Health Transi- Short- tion care tional term health sharing Reform Description policies plans plans ministries Accessibility Guaranteed issue Requires insurers to accept every individual who applies for coverage. – – – – Dependent coverage Requires plans that already provide dependent coverage to make it to age 26 available until the dependent turns 26. √ – √ – Prohibits plans from retroactively canceling coverage, except in the Rescissions case of a subscriber’s fraud or intentional misrepresentation of material √ – √ – fact, and requires prior notice to the insured. Affordability Prohibits plans from charging a higher premium based on health status and gender; allows rates to vary based solely on the number of Rating requirements – – * – enrollees covered, geographic area, age (within limits), and tobacco use (within limits). Medical loss ratio Individual health insurers must spend at least 80 percent of revenue on (MLR) health care and quality improvement. √ – ** – Adequacy Preexisting condition Prohibits insurers from imposing preexisting condition exclusions with exclusions respect to coverage. *** – √ – Requires coverage of 10 categories of essential benefits: ambulatory patient services; emergency services; hospitalization; maternity and newborn care; mental health and substance use disorder services, Essential health including behavioral health treatment; prescription drugs; rehabilitative – – – – benefits and habilitative services and devices; laboratory services; preventive and wellness services; chronic disease management; and pediatric services, including oral and vision care. Requires plans to meet a minimum actuarial value standard of at least 60 percent of total plan costs; requires plans to meet one of four actu- Actuarial value arial value tiers — bronze (60%), silver (70%), gold (80%), or platinum – – – – (90%) — as a measure of how much of a consumer’s medical costs are covered by the plan. Annual cost-sharing Requires insurers to limit annual out-of-pocket costs, including copay- limits ments, coinsurance, and deductibles. – – √ – Prohibits annual limits on the dollar value of covered essential health Annual dollar limits benefits. √ – √ – Prohibits lifetime limits on the dollar value of covered essential health Lifetime dollar limits benefits. √ – √ – Requires coverage of specified preventive health services without cost- Preventive services without cost-sharing sharing, such as copayments, coinsurance, and deductibles, when the √ – √ – insured uses an in-network provider. Transparency Requires insurers to provide standardized, easy-to-understand summa- Summary of benefits ries of the benefits, cost-sharing, limitations, and exclusions of a plan; and coverage summaries must include coverage examples that illustrate how the plan √ – √ – covers specific benefit scenarios. Risk mitigation Each insurer must consider the claims experience of all of their enroll- Single risk pool – – – – ees in all of their individual market plans when setting premium rates. Risk-adjustment Transfers funds from insurers with relatively low-risk enrollees to insur- – – – – program ers with relatively high-risk enrollees. Note: For association health plans (AHPs), exhibit shows standards applicable to such plans that meet the definition of a large-group plan under federal law (see Exhibit 1). * Under proposed federal regulations, AHPs will be allowed to charge higher rates based on factors such as age, gender, occupation, and group size, as long as the plan does not use the health status of individual members to determine eligibility, premiums, or benefits. ** Under proposed federal regulations, self-funded AHPs would be exempt from the ACA’s MLR requirements. The ACA’s MLR standards that apply to the large-group market (85%) would apply to large-group policies sold to fully insured AHPs. *** Transitional polices are prohibited from imposing a preexisting condition exclusion on individuals under age 19. Data: Authors’ analysis. commonwealthfund.org March 2018 State Regulation of Coverage Options Outside the ACA: Limiting Individual Market Risk 5 FINDINGS insurance exchange. (The District of Columbia also operates its own marketplace and bars transitional plans.) Transitional Policies State decisions to allow grandmothered plans have had Although the ACA required all nongrandfathered significant consequences. People who enrolled in and individual insurance policies to comply with its insurance retained transitional coverage have tended to be healthier market reforms by 2014, millions of consumers were than those in the ACA-compliant market, for several permitted to remain in coverage that failed to meet core reasons. First, such individuals likely passed medical ACA standards.12 In late 2013, insurers began to discontinue underwriting when they initially bought coverage, health coverage for people enrolled in plans that were before that practice was banned by the ACA. Second, neither grandfathered under the health law nor compliant because transitional policies offer fewer benefit and with ACA protections slated to take effect in 2014. While cost protections and, consequently, are cheaper than these transitional or grandmothered plans postdated the ACA-compliant coverage, they are more likely to retain ACA’s enactment and therefore complied with the first enrollees who are younger or have limited care needs. wave of reforms effective in 2010, they did not meet the By contrast, those with higher care utilization are more law’s more rigorous 2014 standards. These included a ban likely to migrate to more comprehensive plans that meet on preexisting condition exclusions, a prohibition on the ACA standards. In states that have permitted it, this policy consideration of health status and gender when setting generally has contributed to a segmented market, where premiums, and a requirement to cover a minimum set of relatively healthy, low-cost consumers have remained essential health benefits (Exhibit 2). outside the ACA-compliant risk pool. This has made that To provide transitional relief for consumers who preferred market relatively sicker and less stable.16 to keep their coverage, the Obama administration instituted a policy in late 2013 that paved the way for Short-Term Plans individuals to renew their noncompliant plans for up Short-term plans are designed to provide protection when to two additional years, without running afoul of the a person experiences a temporary gap in comprehensive individual mandate.13 Since then, federal officials have coverage, such as when transitioning between jobs. These repeatedly extended this policy — most recently in plans, which predate the ACA, are not considered to be February 2017 — and enrollment in transitional plans is individual health insurance under federal law and are now permitted through the end of 2018.14 exempt from the ACA’s consumer protections (Exhibit Importantly, federal officials have never required the 2).17 Consequently, short-term plans typically provide continuation of grandmothered plans. Rather, the policy coverage far skimpier than ACA-compliant policies: they regarding transitional plans gives states the choice of may decline to cover preexisting conditions, exclude whether to allow renewal of the noncompliant coverage. health benefits such as preventive services, maternity care, Insurers, in turn, must decide whether to continue to offer and mental health and substance use services, and impose such plans if the state has provided the option. dollar limits on coverage. However, low premiums may make these policies attractive to healthy consumers. And Most states initially allowed the renewal of transitional they are much more profitable for insurers than coverage plans at insurers’ discretion and have continued to do that meets federal consumer protections. so.15 By January 2018, grandmothered plans were still permitted in 36 states, including most states that rely on After receiving reports that many individuals had the federal government to operate their ACA marketplace begun to rely on short-term policies as a primary form (Exhibit 3). By contrast, of the 14 states that prohibit of coverage, and not just as a gap-filler, the Obama noncompliant coverage, 13 manage their own health administration issued new regulations in 2016. These limited the duration of short-term policies to less than commonwealthfund.org March 2018 State Regulation of Coverage Options Outside the ACA: Limiting Individual Market Risk 6 Exhibit 3 State Decisions on Whether to Allow Transitional Policies in the Individual Market, 2018 Exhibit 3. State Decisions on Whether to Allow Transitional Policies in the Individual Market, 2018 WA NH VT ME MT ND OR MN ID MA SD WI NY WY MI RI IA PA CT NV NE NJ OH Transitional policies allowed; UT IL IN DE federally operated marketplace CA CO WV KS VA MD (33 states) MO KY DC NC Transitional policies allowed; TN state-operated marketplace AZ OK NM AR SC (3 states) MS AL GA Transitional policies prohibited; TX LA state-operated marketplace AK (13 states and D.C.) FL HI Transitional policies prohibited; federally operated marketplace (1 state) Notes: In states where transitional policies are allowed, insurers may choose whether to continue to offer such policies. In some states, transitional policies may no longer exist in the individual market, even though permitted under state law. At the time federal officials first made available the option to allow transitional policies, in late 2013, the insurance marketplace in Arkansas was federally operated (it is now state-run), while the marketplace in Hawaii was run by the state (it is now federally operated). Notes: In states where transitional policies are allowed, insurers may choose whether to continue to offer such policies. In some states, transitional policies may no Data: Authors’ analysis. longer exist in the individual market, even though permitted under state law. At the time federal officials first made available the option to allow transitional policies, in late 2013, the insurance marketplace in Arkansas was federally operated (it is now state-run), while the marketplace in Hawaii was run by the state (it is now federally operated). Source: K. Lucia, J. Giovannelli, S. Corlette et al., State Regulation of Coverage Options Outside of the Affordable Care Act: Limiting the Risk to the Individual Data: Authors’ analysis. Market, The Commonwealth Fund, March 2018. three months and prohibited the policies from being setting premiums and are not required to cover essential renewed.18 However, recently proposed regulations would health benefits. Only six of these 47 states limit the initial reverse course and, subject to state law, allow short-term contract duration of short-term plans to fewer than 12 plans to last for up to 12 months and be more easily months (the proposed federal standard) and restrict the renewed or extended.19 sale of multiple consecutive short-term plans.21 Current state laws and regulations governing these Six other states similarly limit initial contract duration; products vary widely (Exhibit 4). Massachusetts, however, they do not prohibit insurers from selling New Jersey, and New York apply extensive consumer multiple consecutive short-term plans, essentially protections, including guaranteed issue, to all new policies allowing a loophole to the limit on contract duration.22 in the individual market, foreclosing underwritten short- While 35 states and the District of Columbia require short- term plans in these states.20 term plans to cover at least one state benefit mandate, none of them require short-term policies to cover all In the remaining 47 states and the District of Columbia, essential health benefits. insurers may refuse to issue a short-term policy — or to renew a policy when an existing contract term ends — on Limits on contract duration and requirements to cover the basis of a consumer’s health status. Insurers generally some mandates have not diminished the availability of are not limited as to the factors they may consider when short-term policies in most states. These policies appear to commonwealthfund.org March 2018 State Regulation of Coverage Options Outside the ACA: Limiting Individual Market Risk 7 Exhibit 4 ExhibitLaw Limitations on on Duration of Short-Term Plans, 2018 2018 State 4. State Law Limitations Duration of Short-Term Plans, Underwritten short-term plans are not permitted (3 states) WA NH Initial contract duration limitation that is more VT ME stringent than proposed federal standards MT ND (<12 months) and state limits total length of OR MN time a consumer can be covered under short- ID MA term plans (6 states) SD WI NY WY MI RI Initial contract duration limitation that is more IA PA CT NV NE NJ stringent than proposed federal standards UT IN OH (<12 months) but state does not limit total IL DE CA CO WV length of time a consumer can be covered KS MO VA MD KY under short-term plans (6 states) DC NC TN State does not have an initial contract AZ OK duration limitation that is more stringent than NM AR SC proposed federal standards (<12 months) but MS AL GA state limits total length of time a consumer TX LA can be covered under short-term plans AK (2 states) FL HI State does not have an initial contract duration limitation that is more stringent than proposed federal standards (<12 months) and state does not limit total length of time a consumer can be covered under short-term plans (33 states and D.C.) Notes: For the purposes of this exhibit, a state is marked as having a limit on initial contract duration if a short-term plan longer than the specified duration would become subject to one or Notes: For following state consumer protections: guaranteed issue, having a limit on initial contract coverage of essential healthplan longer than the specifiedhave limitations on more of the the purposes of this exhibit, a state is marked as guaranteed renewability, or required duration if a short-term benefits. While a number of states duration would become subject to one or more ofnot prohibit issuers from issuing multiple new short-term plans consecutively. For the purposes of this required coverage of essential health benefits. “renewal” of short-term plans, they do the following state consumer protections: guaranteed issue, guaranteed renewability, or map, such states have been marked as not having a limit on total length of time a consumer can be covered under short-term plans. While a number of states have limitations on “renewal” of short-term plans, they do not prohibit issuers from issuing multiple new short-term plans consecutively. For Data: Authors’ analysis. the purposes of this map, such states have been marked as not having a limit on total length of time a consumer can be covered under short-term plans. Data: Authors’ analysis. Source: K. Lucia, J. Giovannelli, S. Corlette et al., State Regulation of Coverage Options Outside of the Affordable Care Act: Limiting the Risk to the Individual Market, The Commonwealth Fund, March 2018. be marketed in most states, aside from those that prohibit coverage for services they need.25 Depending on the state, the sale of underwritten short-term policies.23 However, those who do secure a policy may be at risk of having at least in one state, Rhode Island, the imposition of claims denied because of a preexisting condition or their other regulatory requirements have, as a practical matter, policy rescinded because of post–claims underwriting.26 limited the availability of short-term plans. Rhode The combination of limited benefits and relatively low Island applies some consumer protections, including a premium costs enables short-term plans to siphon off prohibition on preexisting conditions and medical loss healthy individuals from the individual marketplaces. ratio requirements, to short-term policies.24 A review of This, in turn, leads to higher premiums and fewer choices broker websites in that state suggests that, as a result, for consumers seeking comprehensive plans.27 short-term policies are not being marketed there. Enrollment in short-term policies was increasing prior to Allowing the unfettered sale of short-term plans puts the 2016 federal regulations limiting their duration and enrollees at financial risk and weakens the individual renewal. Applications for short-term policies sold through insurance market. Because plans do not have to adhere e-Health, a large online broker, more than doubled to the ACA’s consumer protections, benefits are generally between 2013 and 2014.28 According to data reported to quite limited, and enrollees may find themselves without the National Association of Insurance Commissioners commonwealthfund.org March 2018 State Regulation of Coverage Options Outside the ACA: Limiting Individual Market Risk 8 (NAIC), there were about 160,000 people covered by short- through AHPs differently from coverage in the traditional term policies at the end of December 2016.29 However, this individual and small-group markets, and these regulatory count may significantly underestimate actual take-up: differences served as powerful incentives for insurers recent reports have suggested enrollment may be closer to market AHP coverage to small businesses and the to a million.30 In addition, sellers of short-term policies self-employed.37 For example, in 2011, state regulators or similar policies may file their plans with insurance in Wisconsin estimated that 30 percent of insurance in departments under other categories of coverage that the individual market was sold through an association.38 may not be reflected in the reported data. If the proposed In Ohio, approximately 72 percent of individual market regulatory changes are finalized, enrollment in short-term coverage was written “via association business.”39 plans is projected to expand to 4.2 million people.31 Considering the interest in AHP coverage prior to the ACA and the significant regulatory incentives offered Association Health Plans to AHPs under the proposed federal framework, there Earlier this year, the Trump administration issued a are indications that this market will reemerge. They are proposed regulation that would make it easier for self- bolstered by recent statements by national insurers, such employed individuals and small businesses to purchase as UnitedHealthcare and Anthem, that they are interested health insurance across state lines through association in marketing association coverage.40 health plans, such as those offered by a professional or trade association.32 Under federal law, AHPs generally By creating an uneven playing field for AHPs to compete would be treated as large-employer health plans and with ACA-compliant individual insurance products, would not have to comply with the market standards the proposed federal framework could have a negative and consumer protections that otherwise apply to the impact on the individual market risk pool.41 In a recent individual market, including coverage of essential health analysis, it was reported that 31 percent of individuals benefits (Exhibit 2). with nongroup coverage are self-employed.42 If a sizable and healthier component of this population gravitates This proposed federal approach to AHPs is a departure toward lower-cost, less protective AHP coverage, it could from how health insurance sold through associations is leave the individual market risk pool sicker and smaller. regulated today. Under current federal law, association Over the long term, this could raise premiums and reduce coverage does not exist as a distinct category of health plan options in the ACA-compliant market.43 It has insurance. The general rule is that health insurance happened before. In the mid-1990s, AHPs in Kentucky policies sold through an association to individuals are were exempted from benefit and rating requirements regulated under the same federal standards that apply that applied to the traditional individual and small-group to the individual market.33 Following implementation of markets. Insurers abandoned the traditional markets this “look through” approach to regulating AHPs, insurer and healthy consumers shifted to AHPs, with premiums interest in marketing health insurance to individuals dramatically increasing for those left behind.44 through associations largely fell off in many states.34 In states like Vermont, which had a significant AHP market The impact of the Trump administration’s AHP proposal on prior to the ACA, this federal interpretation, coupled with the individual market remains uncertain. It will likely depend state action, shifted AHPs into the ACA-compliant market, on the leeway AHPs are afforded in marketing to the self- resulting in greater stability.35 employed and using members’ health status to determine eligibility, premiums, and benefits. Perhaps most critically, Although it is difficult to estimate how much the however, the proposal’s effects will depend on whether AHP market would grow under the proposed federal states will continue to have broad authority to regulate framework, there was a sizable AHP market in some states AHPs to ensure a level playing field across their markets. prior to the ACA.36 Often, states regulated coverage sold commonwealthfund.org March 2018 State Regulation of Coverage Options Outside the ACA: Limiting Individual Market Risk 9 Health Care Sharing Ministries arrangements in the marketing materials provided to Health care sharing ministries (HCSMs) are entities prospective members.48 Federal law does not, however, whose members share a common set of religious beliefs dictate whether and how states may regulate these and contribute funds to pay for the qualifying medical entities. In 30 states, legislatures have chosen to enact “safe expenses of other members.45 Members must generally harbor” rules that exempt HCSMs from state insurance pledge to follow religious principles and pay a monthly regulation, provided they meet certain criteria (Exhibit “share” that may vary based on age and level of coverage.46 5). Many of these provisions have been adopted since the The HCSM either matches paying members directly with ACA’s passage and, in some cases, in response to efforts by those who have health costs deemed eligible for help, or regulators to conduct oversight of these arrangements.49 collects the shares to disburse to members in need. HCSMs In states with a safe harbor, insurance regulators are take the position that, because they do not guarantee generally barred from requiring HCSMs to meet standards payment for member claims, they do not constitute and requirements, such as those governing benefits, insurance.47 The arrangements are not regulated as premium rates, licensure, solvency, and oversight, insurance under federal law and do not comply with the applicable to health insurers and the products they offer. ACA’s consumer protections (Exhibit 2). However, the states that have not enacted a safe harbor The ACA exempts members of HCSMs from the federal rarely regulate HCSMs as insurers either. For example, individual mandate, a fact advertised by sponsors of these Montana’s regulator welcomed back one ministry Exhibit 5 ExhibitLaws Governing Whether HealthCare Sharing Ministries Are Exempt from State State 5. State Laws Governing Whether Health Care Sharing Ministries Are Exempt from State Insurance Codes, 2018 Insurance Codes, 2018 WA NH VT ME MT ND OR MN ID MA SD WI NY WY MI RI IA PA CT NV NE NJ IN OH UT IL DE CA CO WV KS VA MD MO KY DC NC TN AZ OK NM AR SC State law explicitly exempts MS AL GA health care sharing ministries TX (30 states) AK LA State law does not contain FL an explicit exemption for HI health care sharing ministries (20 states and D.C.) Note that states that have not explicitly exempted health care sharing ministries from the state insurance code do not necessarily regulate them. Note that states that have not explicitly exempted health care sharing ministries from the state insurance code do not necessarily regulate them. Data: Authors’ analysis. Data: Authors’ analysis. Source: K. Lucia, J. Giovannelli, S. Corlette et al., State Regulation of Coverage Options Outside of the Affordable Care Act: Limiting the Risk to the Individual Market, The Commonwealth Fund, March 2018. commonwealthfund.org March 2018 State Regulation of Coverage Options Outside the ACA: Limiting Individual Market Risk 10 previously barred from offering memberships in that subsidies.57 Marketing materials also promote HCSMs as state when a judge ruled that the HCSM was issuing a way for people to send monthly payments directly to insurance contracts without an insurance license. That someone with similar values, rather than to an insurance ruling prompted a consent agreement whereby the HCSM company. agreed to refrain from doing business in the state unless it But HCSM coverage leaves members at risk of substantial received a certificate of authority.50 out-of-pocket costs for conditions either not covered or Nevertheless, many aspects of HCSM arrangements covered only up to a cap. Moreover, because HCSMs do resemble traditional insurance, according to a review not promise that members’ care costs will be paid, and are of the three largest ministries.51 In addition to paying a not subject to rules designed to ensure sufficient funds to monthly share (akin to a premium), members typically cover claims, members face a greater risk that even eligible must cover, out of pocket, the “unshareable” amount spending will not be reimbursed. And consumers living in of a medical cost (similar to a deductible) and may be the 30 safe-harbor states cannot count on help from their responsible for a coshare amount up to a financial cap. regulators when costs are only partially paid because of Limits on care costs deemed “shareable” by the HCSM inadequate shares or are deemed ineligible for sharing. range from $4,000 to $500,000, depending on the plan, As with other arrangements that pair a low monthly and, in the case of at least one HCSM, may be reduced, payment with a plan that limits benefits for people in increasing a consumer’s financial exposure, if “needs” less-than-perfect health, the design of HCSMs encourages exceed “shares.”52 Some HCSMs also utilize a network selection against the ACA-compliant market. of providers or help members negotiate discounts with providers, and some require members to pay program fees Other Coverage Arrangements or a portion of their share directly to the HCSM itself to In addition to the arrangements discussed above, many cover administrative costs. Some also pay commissions to companies sell consumers other types of health coverage brokers that sell memberships in the ministry.53 products that do not provide comprehensive protection The HCSMs we reviewed exclude or strictly limit coverage in the case of an unexpected medical event and are not for preexisting conditions. For example, under one HCSM, required to comply with the ACA’s individual market for medical costs associated with a condition to be eligible insurance reforms. Nonetheless, these products are for sharing, the member must be symptom-free for one to sometimes marketed as alternatives to major medical five years prior to enrolling. Others apply stricter dollar coverage.58 State regulation of these products varies but limits to preexisting conditions, depending on how long can play a critical role in protecting consumers from the member has been symptom-free and gone without financial risk and helping to stabilize the individual treatment.54 HCSMs are not obligated to cover a minimum market. set of health benefits, and some services are routinely excluded from sharing. Birth control, mental health Direct Primary Care Agreements services, routine care, preventive services, prescription A direct primary care agreement is a contract between a drugs (except in limited circumstances), and services to primary care provider (PCP) and a consumer under which treat developmental delays fall outside guidelines for the consumer pays a periodic membership fee directly to shareable expenses in the three ministries reviewed.55 the PCP and the PCP agrees to provide, at no extra cost, services within the scope of primary care practice, which Membership in HCSMs has spiked since enactment of in some cases includes management of chronic diseases. the ACA, growing, by some estimates, from fewer than The agreement typically does not include coverage of 200,000 members prior to 2010 to about 1 million.56 prescription drugs, specialty care services, hospitalization, State regulators have noted the growth in membership, or most other benefits provided by a major medical often among those who do not qualify for marketplace insurance policy. commonwealthfund.org March 2018 State Regulation of Coverage Options Outside the ACA: Limiting Individual Market Risk 11 In the past few years, a number of states have either Bundled Coverage Packages: Stacking Limited Benefit adopted or proposed legislation declaring that these Plans and Other Arrangements arrangements are not insurance and therefore are The sellers of bundled products package together several not subject to state insurance laws.59 However, these types of coverage that, sold separately, would not be arrangements may cross the line into insurance if, for considered major medical coverage. While the products example, the practice takes on health care risk by allowing vary, they often combine a fixed indemnity policy that unlimited office visits for a flat fee or charges monthly covers a set dollar amount for each day the consumer is fees that are less than the fair market value of the covered in the hospital, a limited prescription drug benefit (often services.60 Even in states that do not exempt direct primary a discount card), and a policy that will cover a limited care contracts from regulation under the insurance number of physician office visits each year. Some also may code, few insurance departments actively regulate these include accident-only coverage or coverage for a specified arrangements. In either case, when states do not conduct disease, such as cancer.64 Because each policy on its own oversight of insurance or insurance-like products, is not considered major medical coverage, these bundled consumers may find they have limited recourse if they products are not subject to the federal standards that have a complaint or if the provider goes out of business apply to individual health insurance plans, including and cannot refund fees. underwriting restrictions and prohibitions of preexisting- condition exclusions. Discount Medical Cards Companies market these products as a more affordable Discount medical cards offer purchasers discounts for alternative to an ACA-compliant plan. But consumers certain medical care, goods, and services. Discount face considerably greater financial risk if they have cards offered only for prescription drugs are common. an unexpected medical event, and those with health In general, consumers pay a onetime enrollment charge conditions may be denied a policy or find that services to plus monthly fees. In return, the card issuer pledges to treat their needs are not covered.65 give the purchaser discounts on covered medical services. However, in many cases, the “discounted” charges are States have broad authority to set minimum standards no better than what consumers could negotiate on their for these products and regulate their marketing and own.61 sale. However, most state regulations do little more than establish minimal benefit standards and consumer Reports of significant marketing abuses by discount card disclosure requirements. Many of these are laid out in an sellers led the NAIC to develop a model state law and NAIC model state law and model state regulation, adopted many states to enact consumer legislation.62 For example, in 28 states.66 However, there are a few exceptions. the NAIC model requires discount card companies to Minnesota, for example, requires companies to secure register with the state or obtain a license. It authorizes a consumer’s attestation that she has underlying major the insurance department to conduct investigations medical coverage before she can enroll in a fixed- of discount card sellers, impose financial penalties, or indemnity product.67 undertake other enforcement actions when appropriate. The model law also restricts deceptive marketing tactics and requires the submission of provider contracts and up-to-date provider lists. According to NAIC, an estimated 21 states have implemented its model or some variation thereof.63 commonwealthfund.org March 2018 State Regulation of Coverage Options Outside the ACA: Limiting Individual Market Risk 12 POLICY IMPLICATIONS A number of states have taken steps to limit the Although states’ approaches to implementing the ACA availability of non-ACA-compliant products and protect can sharply differ, the law’s consumer protections operate against adverse selection. Massachusetts and New nationwide, and nearly all states have taken responsibility York promptly discontinued transitional coverage and for enforcing these reforms in their jurisdictions. The effectively prohibit underwritten short-term policies, insurance exchanges in most states have proven resilient while several other states tightly restrict the duration of in the face of significant change and uncertainty, with such plans. Significantly, Massachusetts also has its own millions of Americans now able to depend on individual individual mandate, requiring state residents to maintain health insurance to protect them both medically and coverage that meets minimum standards.69 Other states financially. have begun to explore enactment of similar policies in anticipation of the federal mandate’s 2019 repeal. However, maintaining a stable individual market will become more challenging, thanks to an environment in On many fronts, states face a federal regulatory approach which healthy consumers are not required to maintain to the individual market that is significantly different insurance and federal regulations are loosened to promote from what was originally envisioned under the Affordable coverage arrangements likely to weaken insurance risk Care Act. In light of these changed circumstances, there pools and raise premiums. These developments may may be value for states in considering regulatory options incline healthy individuals to look increasingly outside the for protecting their individual insurance markets and compliant market for coverage, leaving those who remain their insured beneficiaries from the detrimental effects of to face higher costs and fewer plan choices.68 non-ACA-compliant policies. The decisions states make will likely have a significant impact on their residents’ Based on our review of state laws and standards, it appears access to adequate and affordable coverage and on the that no state maintains a regulatory environment that stability of their individual health insurance markets. fully protects its individual health insurance market from being undermined by the alternative coverage options we have identified. However, states continue to be the How We Conducted This Study primary regulators of private health insurance. Although This analysis is based on a review of applicable laws, the ACA set a federal floor of consumer protections for regulations, and guidance enacted or promulgated insurers that operate in the individual market, it did not prior to February 1, 2018, by each of the 50 states curtail states’ power to regulate above these minimum and the District of Columbia. This review was standards and to exercise full authority over coverage supplemented by correspondence with state arrangements that fall outside the scope of federal regulators in 49 states and the District of Columbia. insurance law. commonwealthfund.org March 2018 State Regulation of Coverage Options Outside the ACA: Limiting Individual Market Risk 13 NOTES Across the Country? (Robert Wood Johnson Foundation Mark Farrah Associates, A Brief Look at the Turbulent 1 and Urban Institute, Jan. 2017). Individual Health Insurance Market (Mark Farrah 9 S. R. Collins, M. Z. Gunja, and M. M. Doty, Following the Associates, July 19, 2017). ACA Repeal-and-Replace Effort, Where Does the U.S. Exec. Order No. 13813, 82 FR 48385 (2017). 2 Stand on Insurance Coverage? (The Commonwealth Fund, Sept. 2017). Act to Provide for Reconciliation Pursuant to Titles II 3 and V of the Concurrent Resolution on the Budget for 10 For a discussion of actions by the administration that Fiscal Year 2018 (commonly known as the Tax Cuts and have undermined ACA implementation, see, e.g., J. Jobs Act of 2017), H.R. 1, 115th Congress (2017). Rovner, “Timeline: Roadblocks to Affordable Care Act Enrollment,” Kaiser Health News, Nov. 1, 2017; S. J. Giovannelli, K. Lucia, and S. Corlette, Implementing 4 Kliff, “This Is What Obamacare Sabotage Looks Like,” the Affordable Care Act: State Action to Reform Vox, Sept. 5, 2017; and A. Carlsen and H. Park, “The the Individual Health Insurance Market (The Same Agency That Runs Obamacare Is Using Taxpayer Commonwealth Fund, July 2014). Money to Undermine It,” New York Times, Sept. 4, 2017. Centers for Medicare and Medicaid Services, “Final 5 11 For a more detailed discussion of coverage options not Weekly Enrollment Snapshot for 2018 Open Enrollment compliant with the ACA’s market rules and the threats posed Period,” Press release (CMS, Dec. 28, 2017); and National to insured markets, see T. S. Jost, “Loopholes in the Academy for State Health Policy, State Health Insurance Affordable Care Act: Regulatory Gaps and Border Crossing Marketplace Enrollment (Plan Selections) 2017 and 2018 Techniques and How to Address Them,” St. Louis University (NASHP, Feb. 7, 2018). Journal of Health Law & Policy, 2011 5(1):27–82. National Center for Health Statistics, Early Release of 6 12 Grandfathered policies are policies that were in effect Selected Estimates Based on Data from the National before the ACA was passed in March 2010. These Health Insurance Survey, January–June 2017 (Centers policies can be renewed indefinitely as long as they do for Disease Control and Prevention, Dec. 2017); and A. not undergo substantial changes. They may not include L. Goldman, S. Woolhandler, D. U. Himmelstein et al., some rights and protections provided under the ACA. “Out-of-Pocket Spending and Premium Contributions See American Academy of Actuaries, Individual and After Implementation of the Affordable Care Act,” Small Group Markets Committee, An Evaluation of the JAMA Internal Medicine, March 2018 178(3):347–55. Individual Health Insurance Market and Implications of Potential Changes (AAA, Jan. 2017). C. Cox, A. Semanskee, and L. Levitt, Individual 7 Insurance Market Performance in Late 2017 (Henry J. 13 Center for Consumer Information & Insurance Kaiser Family Foundation, Jan. 2018); and M. J. McCue Oversight, 2013 Letter to Insurance Commissioners: and M. A. Hall, “On the Road to Recovery: Health Extension of Transitional Policies (CCIIO, Nov. 14, 2013). Insurers’ 2016 Financial Performance in the Individual Market,” To the Point, The Commonwealth Fund, March 14 J. Wu, Extended Transition to Affordable Care Act– 22, 2018. Compliant Policies (Center for Consumer Information & Insurance Oversight, Feb. 23, 2017). A. Semanskee, C. Cox, G. Claxton et al., Insurer 8 Participation on ACA Marketplaces, 2014–2018 15 K. Lucia, S. Corlette, and A. Williams, “The Extended (Henry J. Kaiser Family Foundation, Nov. 10, 2017); A. ‘Fix’ for Canceled Health Insurance Policies: Latest Semanskee, G. Claxon, and L. Levitt, How Premiums Are State Action,” To the Point, The Commonwealth Fund, Changing in 2018 (Henry J. Kaiser Family Foundation, Nov. 21, 2014; and K. Lucia, K. Keith, and S. Corlette, Nov. 29, 2017); and J. Holahan, E. Wengle, L. J. Blumberg “Update: State Decisions on the Health Insurance Policy et al., What Explains the 21 Percent Increase in 2017 Cancellations Fix,” To the Point, The Commonwealth Marketplace Premiums, and Why Do Increases Vary Fund, Jan. 8, 2014. commonwealthfund.org March 2018 State Regulation of Coverage Options Outside the ACA: Limiting Individual Market Risk 14 16 E. Huth and J. Karcher, A Financial Post-Mortem: Times, Nov. 30, 2017; and E. Larsen and Z. Tracer, “The Transitional Policies and the Financial Implications Health Plans Trump Backs Have a Long History of for the 2014 ACA Individual Market (Milliman, July 20, Disputes,” Bloomberg, Oct. 17, 2017. 2016); and American Academy of Actuaries, Drivers of 2015 Health Insurance Premium Changes (American 26 See, for example, G. Schuman, “Post Claims Academy of Actuaries, June 2014). Underwriting: A Life & Health Insurer’s Right to Investigate or Bad Faith?”, Tort Trial & Insurance 17 42 U.S.C. § 300gg–91 (2012). Practice Law Journal, Spring/Summer 2010 45(3– 4):697–760; and P. Harbage and H. Haycock, Primer 18 “Excepted Benefits; Lifetime and Annual Limits; and on Post-Claims Underwriting (Robert Wood Johnson Short-Term, Limited-Duration Insurance,” 81 Fed. Reg. Foundation, June 12, 2009). 75316, 75326 (Oct. 31, 2016). 27 S. A. Westerfield, Comment Letter to Departments 19 “Short-Term, Limited-Duration Insurance,” 83 Fed. Reg. of Labor, Treasury, and Health and Human Services 7437 (Feb. 21, 2018). Regarding Proposing Regulations and Revising Guidance Pursuant to Executive Order Issued on October 12 20 For example, New Jersey requires that all plans sold (American Academy of Actuaries, Nov. 7, 2017). on the individual market be standard individual plans, and confirmed via correspondence with a state 28 eHealth, Costs and Trends in the Short-Term Health regulator, Nov. 13, 2017. Insurance Market, 2015 (eHealth, April 2016). 21 For the purposes of this report, we counted a state as 29 National Association of Insurance Commissioners, having a limit on initial contract duration if a short- 2016 Accident and Health Policy Experience Report term plan longer than the specified duration would (NAIC, July 2017). become subject to one or more of the following state consumer protections: guaranteed issue, guaranteed 30 R. Abelson, “Without Obamacare Mandate, ‘You Open renewability, or required coverage of essential health the Floodgates’ for Skimpy Health Plans,” New York benefits. Times, Nov. 30, 2017. 22 Two states, Maine and Wisconsin, do not go further L. J. Blumberg, M. Buettgens, and R. Wang, The Potential 31 than federal law in terms of limiting contract duration, Impact of Short-Term Limited-Duration Policies on but they do limit how many short-term plans an Insurance Coverage, Premiums, and Federal Spending insurer can sell to an individual. (Urban Institute, Feb. 2018). 23 Authors’ analysis. Authors searched for short- 32 Exec. Order No. 13813, 82 FR 48385 (2017). term plans for a 40-year-old, nonsmoking male on ehealthinsurance.com. We limited our search to one 33 G. Cohen, Application of Individual and Group zip code per state capital city. Market Requirements Under Title XXVII of the Public Health Service Act When Insurance Coverage Is Sold 24 Rhode Island Code, chapter 27-18, Accident and to, or Through, Associations (Centers for Medicare Sickness Insurance Policies, applies to all short-term and Medicaid Services, Sept. 1, 2011); and 45 C.F.R. § plans. This chapter includes the section on prohibition 144.102(c) 2017. on preexisting condition exclusions (§ 27-18-71) and medical loss ratio reporting requirements (§ 27-18-75); 34 K. Lucia, S. Corlette, S. Ahn et al., Post–Affordable Care confirmed via correspondence with state regulator, Act Trends in Health Coverage for Small Businesses: Feb. 13, 2018. Views from the Market (Robert Wood Johnson Foundation and Urban Institute, Sept. 2015). 25 R. Abelson, “Without Obamacare Mandate, ‘You Open the Floodgates’ for Skimpy Health Plans,” New York 35 BlueCross BlueShield of Vermont, We’re Here to Help You Transition to the New Health Exchange (BCBSVT, commonwealthfund.org March 2018 State Regulation of Coverage Options Outside the ACA: Limiting Individual Market Risk 15 April 2014); and Vt. Gen. Assemb. H.559. Reg. Sess. instability and insolvency. See, for example, M. Kofman, 2011-2012 (2012). E. Bangit and K. Lucia, MEWAs: The Threat of Plan Insolvency and Other Challenges (The Commonwealth 36 M. Kofman, K. Lucia, E. Bangit et al., “Association Fund, March 2004); and M. Kofman, K. Lucia and E. Health Plans: What’s All the Fuss About?” Health Bangit, Health Insurance Scams: How Government Is Affairs, Nov./Dec. 2006 25(6):1591–602; M. Kofman, K. Responding and What Further Steps Are Needed (The Lucia, E. Bangit et al., “Association Health Insurance: Is Commonwealth Fund, Aug. 2003). It Time to Regulate This Product?” Journal of Insurance Regulation, Fall 2005 24(1):31–45; M. A. Hall, “The 42 L. Hamel, J. Firth, L. Levitt et al., Survey of Non-Group Geography of Insurance Regulation,” Health Affairs, Health Insurance Enrollees, Wave 3 (Henry J. Kaiser March 2000 19(2):173–84; National Association of Family Foundation, May 20, 2016). Insurance Commissioners, Rate Review Comment Letter on Associations and Survey Responses (NAIC, 43 This dynamic may be exacerbated by the proposed July 20, 2011); and National Association of Insurance rule’s lax approach to coverage eligibility. Though Commissioners, Rate Review Regulation State Survey individual enrollment in AHP coverage is ostensibly Responses (NAIC, n.d.). limited by the proposal to “working owners” — sole proprietors and the self-employed — individuals 37 M. Kofman, K. Lucia, E. Bangit et al., “Association would be permitted to enroll based only on an Health Plans: What’s All the Fuss About?” Health attestation of eligibility without the requirement that Affairs, Nov./Dec. 2006 25(6):1591–602; M. Kofman, K. AHPs take steps to confirm such information. This Lucia, E. Bangit et al., “Association Health Insurance: Is approach makes fraudulent or erroneous sign-ups far It Time to Regulate This Product?” Journal of Insurance more likely, further expanding AHP enrollment at the Regulation, Fall 2005 24(1):31–45; and M. A. Hall, “The expense of the compliant market. Geography of Insurance Regulation,” Health Affairs, March 2000 19(2):173–84. 44 Kentucky Department of Insurance, Market Report on Health Insurance (KY DOI, April 1997). 38 National Association of Insurance Commissioners, Rate Review Comment Letter on Associations and 45 Defined in 26 U.S.C. § 5000A(d)(2)(B) (2012). Survey Responses (NAIC, July 20, 2011); and National Association of Insurance Commissioners, Rate Review 46 The information and examples provided in this section Regulation State Survey Responses (NAIC, n.d.). are based on a review of the guidelines for the three largest health care sharing ministries. See Samaritan 39 Ibid. Ministries, Guidelines for Health Care Sharing (Samaritan Ministries, Jan. 2018); Christian Healthcare 40 Anthem, Anthem’s (ANTM) CEO Gail Boudreaux on Q4 Ministries, Guidelines Version 1, 2018 (Christian 2017 Results — Earnings Call Transcript (Jan. 31, 2018); Healthcare Ministries, 2018); and Medi-Share, Program and UnitedHealth Group, UnitedHealth Group (UNH) Guidelines and Frequently Asked Questions (Medi- CEO David Wichmann on Q4 2017 Results — Earnings Share, Nov. 2017). Call Transcript (Jan. 16, 2018). 47 Ibid. American Academy of Actuaries, “Actuaries Suggest 41 Focus on Risk and Financial Security Issues to 48 Ibid. Policymakers Ahead of State of the Union Speech,” Press release (American Academy of Actuaries, Jan. 49 L. Turner, “How Over a Million Christians Have Opted 25, 2018); and American Academy of Actuaries, Issue Out of Health Insurance,” BuzzFeed News, June 1, Brief: Association Health Plans (AAA, Feb. 2017). AHP 2017; Tulsa Business Staff, “Holland Orders Medi-Share coverage may pose difficulties for enrollees, as well. In Program to Stop Offering Insurance,” Tulsa Business the past, AHPs have been used as vehicles for selling and Legal News, Feb. 7, 2008; M. Steffan, “Court fraudulent coverage and have a history of financial Rules Medi-Share Must End Cost-Sharing Ministry commonwealthfund.org March 2018 State Regulation of Coverage Options Outside the ACA: Limiting Individual Market Risk 16 in Kentucky,” Christianity Today, Oct. 3, 2012; and J. 60 Maryland Insurance Administration, Report on Aleccia, “Banking on Faith: Cost-Sharing Ministries “Retainer” or “Boutique” or “Concierge” Medical Offer Obamacare Alternative,” Seattle Times, May 2, Practices and the Business of Insurance, MIA-2008-12- 2015. 002 (MD Insurance Administration, Jan. 2009). 50 Commissioner of Securities & Insurance, Office of the 61 M. Kofman, J. Libster, and E. Bangit, Discount Medical Montana State Auditor, “Rosendale Welcomes Medi- Cards: Innovation or Illusion? (The Commonwealth Share to Montana,” Press release (Office of Montana Fund, March 2005). State Auditor, April 3, 2017). 62 Ibid.; and National Association of Insurance See note 46. 51 Commissioners, Discount Medical Plan Organization Model Act, Model #98 (NAIC, Oct. 2007). 52 Ibid. 63 National Association of Insurance Commissioners, 53 T. Leys, “More Iowans Opting for ‘Health Sharing Discount Medical Plan Organization Model Act, Model Ministries’ as Alternative to Increasingly Pricey #98 (NAIC Oct. 2007). Insurance,” Des Moines Register, Dec. 8, 2017. 64 J. Appleby, “Brokers Tout Mix-and-Match Coverage to 54 See note 46. Avoid High-Cost ACA Plans,” Kaiser Health News, Dec. 7, 2017. 55 Medi-Share has an exception to the exclusion of preventive care for children up to age 6. See Medi-Share, 65 Ibid. See also L. Norris, “Bundled Plans: a New Program Guidelines and Frequently Asked Questions Obamacare ‘Alternative?’” (HealthInsurance.org, Dec. (Medi-Share, Nov. 2017). 20, 2017). 56 L. Santhanam, “1 Million Americans Pool Money in 66 National Association of Insurance Commissioners, Religious Ministries to Pay for Health Care,” PBS News Accident and Sickness Insurance Minimum Standards Hour, Jan. 16, 2018. Model Act, Model #170 (NAIC, April 1999); and National Association of Insurance Commissioners, Model 57 J. O’Malley, “More Self-Employed Alaskans Are Regulation to Implement the Accident and Sickness Choosing Faith-Based Coverage,” Anchorage Daily Insurance Minimum Standards Model Act, Model #171 News, updated Dec. 3, 2017. (NAIC, April 1999). 58 C. L. Engelhard, “Is Direct Primary Care Part of the 67 Minn. Stat. §§ 62A.48, 62A.135, 62E.02; Minn. R. Solution or Part of the Problem,” The Hill, Oct. 13, 2014; 2740.1200. Zenith Direct Care, Homepage (accessed Feb. 15, 2018); Delaware Department of Insurance, Discount Medical 68 L. J. Blumberg, M. Buettgens, and R. Wang, The Potential Card Scams (DE DOI, accessed Feb. 15, 2018); L. Norris, Impact of Short-Term Limited-Duration Policies on “Bundled Plans: a New Obamacare ‘Alternative?’” Insurance Coverage, Premiums, and Federal Spending (HealthInsurance.org, Dec. 20, 2017); and Nasdaq (Urban Institute, Feb. 2018). GlobeNewswire, “The IHC Group Unveils Fusion: The Innovative, First-to-Market Health Plan for Consumers 69 Massachusetts regulations provide that membership Integrating Fixed-Indemnity Benefit and Short-Term in “any health arrangement provided by established Medical Plans,” Press release (IHC Group, Sept. 6, 2017). religious organizations comprised of individuals with sincerely held beliefs” satisfies the state’s individual 59 Direct Primary Care Frontier, States with Direct Primary mandate requirement. 956 Mass. Code Regs. § 5.03(3) Care Laws (DPC Frontier, n.d.). (b)(3). In correspondence, state officials note that this provision encompasses membership in a health care sharing ministry. commonwealthfund.org March 2018 State Regulation of Coverage The Commonwealth Fund Options Outside the ACA: Limiting Individual Market Risk How High Is America’s Health Care Cost Burden? 17 APPENDIX. STATE LAW LIMITATIONS ON DURATION OF SHORT-TERM PLANS, 2018 Short-term plans HCSMs Initial contract duration Limits on How many exempt limitations more total length of state individual Transitional from state stringent than proposed time a consumer market benefit policies insurance federal standards, can be covered mandates apply to State allowed? code? i.e., <12 months? under STPs? short-term plans? Alabama Yes Yes No No None Alaska Yes Yes No No None Arizona Yes Yes Yes, 185 days No None Arkansas Yes Yes No No All California No No Yes, 185 days No Some Yes, a consumer must wait 6 months to apply after enrollment Colorado No No Yes, 6 months All in two short-term plans within a period of 12 months Connecticut No No Yes, 6 months1 No All Delaware No No No No Some District of No No No No Some Columbia Florida Yes Yes No No All Georgia Yes Yes No No Some7 Hawaii Yes No No No None9 Idaho Yes Yes No No None Illinois Yes Yes No No Some Indiana Yes Yes Yes, 6 months2 No Some Iowa Yes Yes No No Some Kansas Yes Yes No No All Kentucky Yes Yes No No Some Louisiana Yes Yes No No None Yes, a consumer’s coverage Maine Yes Yes No under a short-term plan Some cannot exceed 24 months Maryland No Yes No No All Massachusetts No No Underwritten short-term plans are not permitted in the state Yes, a consumer’s coverage under a short-term plan cannot Michigan Yes Yes Yes, 185 days Some exceed 185 days in a 365-day period per insurer Yes, a consumer’s coverage under a short-term plan cannot Minnesota No No Yes, 185 days All exceed 365 days in a 555-day period per insurer Mississippi Yes Yes No No None Missouri Yes Yes No No Some7 Montana Yes No No No None Nebraska Yes Yes No No None8 Yes, a consumer’s coverage under a short-term plan cannot Nevada No No Yes, 185 days Some exceed 185 days in a 365-day period per insurer commonwealthfund.org March 2018 State Regulation of Coverage The Commonwealth Fund Options Outside the ACA: Limiting Individual Market Risk How High Is America’s Health Care Cost Burden? 18 Short-term plans HCSMs Initial contract duration Limits on How many exempt limitations more total length of state individual Transitional from state stringent than proposed time a consumer market benefit policies insurance federal standards, can be covered mandates apply to State allowed? code? i.e., <12 months? under STPs? short-term plans? Yes, a consumer’s coverage under a short-term plan New Hampshire Yes Yes Yes, 6 months Some cannot exceed 540 days in a 24-month period New Jersey Yes No Underwritten short-term plans are not permitted in the state New Mexico No No No No Some New York No No Underwritten short-term plans are not permitted in the state North Carolina Yes Yes No No Some North Dakota Yes No Yes, 185 days No Some Ohio Yes No No No Some Oklahoma Yes Yes No No None8 Yes, a consumer’s coverage Some under a short-term plan Oregon No No Yes, 3 months cannot exceed 3 months (includ- ing any renewals) per insurer3 Pennsylvania Yes Yes No No All Rhode Island No No No No All South Carolina Yes No No No Some South Dakota Yes Yes Yes, 6 months No Some Tennessee Yes No No No Some Texas Yes Yes No No All Utah Yes Yes No No Some Vermont4 No No No No Some Virginia Yes Yes No No Some7 Washington No Yes No 5 No None West Virginia Yes No No No Some Yes, a consumer’s coverage under a short-term plan Wisconsin Yes Yes No Some cannot exceed 18 months per insurer6 Wyoming Yes Yes No No None8 Notes: States that have not explicitly exempted health care sharing ministries from the state insurance code do not necessarily regulate them. There are currently no short-term policies being sold in Massachusetts, New Jersey, New York, Rhode Island, and Vermont. For the purposes of this table, a state is marked as having a limit on initial contract duration if a short-term plan longer than the specified duration would become subject to one or more of the following state consumer protections: guaranteed issue, guaranteed renewability, or required coverage of essential health benefits. While a number of states have limitations on “renewal” of short-term policies, they do not prohibit issuers from issuing multiple new short-term policies consecutively. For the purposes of this table, such states have been marked as “No” in the column titled “Limits on total length of time a consumer can be covered under STPs?”. For the purposes of this table, we have excluded state mandates that are conditioned on the coverage of a broader benefit category, such as when inpatient maternity stay is mandated only for those plans that cover maternity services. 1 Connecticut: Makes consecutive short-term policies subject to certain preexisting condition coverage requirements. 2 Indiana: This is per Indiana Department of Insurance’s statutory interpretation. 3 Oregon: Definition of “renewal” includes the issuance of a new short-term policy by an insurer to a policyholder within 60 days after the expiration of a policy previ- ously issued. 4 Vermont: Per discussion with regulators at the Department of Financial Regulation, current law does not explicitly address non–major medical short-term plans, nor does it restrict them. However, no short-term plans have been approved by the Department so far. The Vermont legislature is currently considering legislation that would limit the duration of short-term plans in the state. 5 Washington: Plans have to be approved by the insurance commissioner and deemed to have a short-term limited purpose or duration before they can be exempt from certain individual market requirements. 6 Wisconsin: Coverage periods are considered consecutive if there are no more than 63 days between the coverage periods. 7 Georgia, Hawaii, Missouri, and Virginia: Short-term policies longer than 6 months are subject to additional state benefit mandates. 8 Nebraska, Oklahoma, and Wyoming: Short-term policies longer than 6 months are subject to some state benefit mandates. 9 Per Hawaii Department of Commerce and Consumer Affairs, Insurance Division’s statutory interpretation. Data: Authors’ analysis. commonwealthfund.org March 2018 State Regulation of Coverage Options Outside the ACA: Limiting Individual Market Risk 19 ABOUT THE AUTHORS on state and federal health insurance market reforms Kevin Lucia, J.D., M.H.P., is a research professor at with an emphasis on insurance benefit design, access to the Center on Health Insurance Reforms, Health Policy health care, and coverage for chronic health conditions. Institute, McCourt School of Public Policy at Georgetown Previously she worked as senior counsel for health and University. His research focuses on the regulation of reproductive rights at the National Women’s Law Center private health insurance, with an emphasis on access, and as associated director of health policy for the Service affordability, and adequacy of coverage. Lucia received Employees International Union. Palanker earned a J.D. his law degree from the George Washington School from Georgetown University, an M.P.P. from the Kennedy of Law and his master’s degree in health policy from School of Government at Harvard University. Northeastern University. Maanasa Kona, J.D., L.L.M., is a research fellow at Justin Giovannelli, J.D., M.P.P., is an associate research the Center on Health Insurance Reforms, Health Policy professor at the Center on Health Insurance Reforms, Institute, McCourt School of Public Policy at Georgetown Health Policy Institute, McCourt School of Public Policy at University. Her research focuses on state-level regulation Georgetown University. His research focuses primarily on of the individual and small-group health insurance the implementation of the Affordable Care Act’s market markets. Kona received her J.D. from American University, reforms and health insurance exchanges at the federal Washington College of Law, and her L.L.M. from the and state levels. Giovannelli received his law degree from George Washington University Law School. the New York University School of Law and his master’s Emily Curran, M.P.H., is a research fellow at the Center degree in public policy from Georgetown’s Public Policy on Health Insurance Reforms, Health Policy Institute, Institute. McCourt School of Public Policy at Georgetown University. Sabrina Corlette, J.D., is a research professor at the Her research focuses on private health insurance and the Center on Health Insurance Reforms, Health Policy effects of the Affordable Care Act, with emphasis on the Institute, McCourt School of Public Policy at Georgetown implementation of the federal and state health insurance University. Her areas of focus include state and federal marketplaces. Curran received her M.P.H. in health policy regulation of private health insurance plans and markets, from George Washington University’s Milken Institute and the implementation of new rules for insurance School of Public Health. markets under the Affordable Care Act. Corlette received her law degree from the University of Texas at Austin. ACKNOWLEDGMENTS JoAnn Volk, M.A., is a research professor at the Center The authors thank the state insurance regulators who on Health Insurance Reforms, Health Policy Institute, shared their time and valuable insights with us. We are also McCourt School of Public Policy at Georgetown University. grateful to Linda Blumberg, Christina Goe, Tim Jost, Jon Her work is focused on the regulation of private health Kingsdale, and Sarah Lueck for their thoughtful review. insurance under the Affordable Care Act and the effect of health coverage reform on access, affordability, and Editorial support was provided by Joris Stuyck. adequacy of coverage for consumers. Volk received her master’s degree in public policy from Johns Hopkins University, with a concentration in health policy. For more information about this report, please contact: Kevin Lucia, J.D., M.H.P. Dania Palanker, J.D., M.P.P., is an assistant research Research Professor, Center on Health Insurance Reforms, professor at the Center on Health Insurance Reforms, Health Policy Institute, McCourt School of Public Policy, Health Policy Institute, McCourt School of Public Georgetown University Policy at Georgetown University. Her research focuses kwlgeorgetown.edu commonwealthfund.org March 2018 About The Commonwealth Fund The Commonwealth Fund, among the first private foundations started by a woman philanthropist — Anna M. Harkness — was established in 1918 with the broad charge to enhance the common good. The mission of The Commonwealth Fund is to promote a high performance health care system. The Fund carries out this mandate by supporting independent research on health care issues and making grants to improve health care practice and policy. An international program in health policy is designed to stimulate innovative policies and practices in the United States and other industrialized countries. Support for this research was provided by The Commonwealth Fund. The views presented here are those of the authors and not necessarily those of The Commonwealth Fund or its directors, officers, or staff. To learn more about new publications when they become available, visit the Fund’s website and register to receive email alerts.