How Short-Term Health Insurance May Change Under Trump—Again

Rules about how long you can keep short-term insurance may be about to change for a fourth time in nine years under the incoming Trump administration. 

His team will likely reverse Biden administration changes that went into effect in September, limiting coverage to four months total in any one short-term plan. The Biden administration called the plans “junk insurance” because they lack comprehensive coverage and discriminate based on preexisting conditions. 

Trump is expected to revert to 2018 rules he enacted in his first term that allow insurance companies to offer plans that last about a year and can be renewed for two more. 

Conservative Support for 3-Year Plans 

Short-term health insurance (STHI) plans provide temporary coverage for people in-between group coverage policies, such as those you get from employers, or other longer-lasting health insurance policies. Short-term plans aren’t intended as primary ongoing coverage. The policies offer limited coverage as a tradeoff for lower premiums. 

In the past eight years, rules from the Departments of Human and Health Services, Labor, and Treasury (“the Departments”) of three administrations have repeatedly revised the federal definition of STHI. With each administration’s revision, the length of time a plan can offer coverage either contracted or expanded.

“There’s a significant chance of changes,” said Brian Blase, health policy expert, former Trump White House official, and president of Paragon Health Institute, a conservative policy organization focused on healthcare.

“The Trump Administration had a great short-term rule in place that Biden reversed,” he said. “I think it’s likely that there will be a reversal on the reversal.”

In 2018, the Trump administration implemented a rule allowing individuals to buy short-term insurance plans lasting up to 364 days, which could be renewed or extended for roughly three years. 

Those supporting STHI extensions, including the conservative-leaning Paragon Institute, Cato Institute, and the National Association of Insurance and Financial Advisors, note that shorter three-month federal limits:

• Deprive enrollees of more affordable coverage options
• May leave some people without any coverage at all 
• Prevent consumer choice and state-based regulation

 They say that short-term plans offer several advantages, including:

• Being available for purchase at any point in the year (as opposed to ACA plans, which usually can only be bought during open enrollment)
• Next-day coverage for many plans
• Significantly lower premiums compared to ACA (Obamacare) premiums
• Consumer choices regarding out-of-pocket limits, deductibles, and other insurance components 
• Choices regarding coverage types, such as opting out of prescription coverage that may not be necessary

In the ensuing years, states either followed federal rules, added their coverage requirements for preexisting conditions and other rules, or instituted more restrictive requirements, including prohibiting coverage.

As two examples, California banned the plans in 2019. In 2020, Idaho created a unique category of “enhanced short-term plans.” These affordable plans were required to cover enrollees’ preexisting conditions, were guaranteed renewable, and even converted to Affordable Care Act (ACA) Marketplace plans.

Decades of Changes

Trump’s 2018 changes upended another change made shortly before he took office. In 2016, the Departments shortened the permitted coverage duration to less than three months. 

For two decades before 2016, short-term plan limits were set at less than 12 months at the federal level, although states could enact stricter limits. 

But there was a concern that short-term plans pulled healthier, cost-sensitive enrollees out of individual ACA Marketplace risk pools, weakening that market. In addition, some consumers might confuse the plans with primary Marketplace health coverage due to misleading or high-pressure sales tactics.

In addition, the Obama and Biden actions responded to concerns from liberal-leaning organizations such as the McCourt School of Public Policy at Georgetown University, the Commonwealth Fund, and the Urban Institute regarding the plans. These groups pointed out that the plans:

• Limited coverage for various health services, including pregnancy
• Potentially denied coverage for preexisting conditions
• Put lifetime limits on coverage of medical expenses that could lead to high out-of-pocket costs
• Were left to the states to regulate 
• Provided low value for consumers 

Fast forward to September 2024, when the Biden government launched the latest set of rules–the third in eight years. The initial contract term for a short-term plan must be no more than three months. Maximum can be no longer than four months, including all renewals and extensions.

How Fast Will the Trump Administration Act?

Blase noted that any change must undergo a notice and comment rulemaking period, but that process will be easier now.

“They’ll likely go back to the general framework of the rule they put together in 2018,” Blase said of the Trump administration. 

While it won’t be done in the first three months of the year, it’s likely to happen in the first calendar year, he said. Due to the recent Biden policy enactment, there may also be some form of yet-unknown relief or an immediate solution for people trapped without short-term health insurance options, he said.

In September 2024, the Paragon Institute, in concert with 40 policy experts, offered a compromise or alternative solution: allowing uninsured individuals who don’t qualify for any of the usual special enrollment periods to purchase short-term plans after the ACA open enrollment period ends.

As suggested, the plans would last until the next open enrollment period. The Biden Administration did not implement this suggestion.