Effects of Short-Term Limited Duration Plans on the ACA-Compliant Individual Market

The Affordable Care Act (ACA) created an environment in which individuals could purchase coverage in the individual market (ACA-compliant individual market) without discrimination on the basis of health. Many of the additional provisions embedded in the ACA were designed to make the coverage more comprehensive or to enhance the stability of the ACA-compliant individual market. Recently, the Trump Administration has released a proposed regulation allowing individuals to enroll in STLDI plans for a longer time period than permitted by current regulation and also making it easier to renew coverage. Both of these proposed changes increase the availability and attractiveness of STLDI plans. The proposed regulation has the potential to increase market instability, market segmentation, and adverse selection in the ACA-compliant individual market because a substantial number of healthy members will likely migrate to STLDI plans.

This paper analyzed the proposed STLDI regulatory change and the potential effects it could have on the ACA-compliant individual market. We analyzed the impact using a variety of methodologies to develop a range of enrollment decreases and premiums increases within the ACA-compliant individual market. The scenarios were based on estimated impacts by the tri-agency departments, a comparison to ACA transitional enrollment, and 2016 ACA-compliant individual claims and membership data.

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