Buying short-term coverage in Delaware
- New Delaware regulations limit short-term plans to three months and prohibit renewal as of December 2018.
- Under the new regulations, short-term plans cannot be renewed or extended, and an insurer cannot issue a new policy to the same applicant more than once in a year. Successive back-to-back plans are also prohibited.
- Short-term plans must have loss ratios of at least 60 percent as of December 2018.
- Several insurers stopped selling short-term plans in late 2018, but had rejoined the state’s market under the new rules by mid-2019.
Delaware’s new regulations limit the duration of short-term plans to three months
Until October 2, 2018, federal regulations limited short-term health insurance plans to no more than three months in duration, and prohibited renewals. The Trump Administration began allowing for much longer short-term plans as of October 2018, unless a state imposed its own restrictions.
Before the Trump administration relaxed the federal rules for short-term health insurance plans, Delaware did not have its own rules. But the Delaware Insurance Department noted in August 2018 that it was “conversing with other nearby states to inquire what regulations they have adopted” in terms of short-term health plans, and was beginning the process of drafting their own regulations.
The state’s new regulations were published in November, and took effect on December 1, 2018, limiting short-term plans to three months in duration and prohibiting renewals. Delaware residents had a short window — from October 2 to November 30 — during which longer short-term plans were available for purchase. But those plans were no longer available after the end of November, and most of the insurers that previously offered short-term plans in the state had stopped doing so by December 2018. Several of them had rejoined the state’s market by mid-2019, however.
The new regulations were issued as emergency regulations, effective until March 31, 2019. That gave the state time to draft and implement permanent regulations for short-term health plans, which it did in January 2019. At that point, the permanent regulations took the place of the emergency order, although the provisions are identical.
How long can short-term plans last in Delaware?
Until December 1, 2018, the new federal regulations (which allow longer short-term plans) applied in the state, and there were plans available for purchase with 6-month and 12-month durations. But the Delaware Insurance Department placed new rate/form filings on hold until the state’s regulations were finalized.
The state’s new regulations, effective December 1 (and now permanently in force), limit short-term plans to three months and prohibit renewals. Insurers are also not allowed to offer successive back-to-back short-term plans to the same policyholder, and a new short-term plan can’t be sold to the same person more than once in a given year.
Other requirements in Delaware’s new regulations
Delaware’s regulations for short-term plans go beyond simply restricting the duration of the plans. Under the terms of the new regulations:
- Short-term plans must have loss ratios of at least 60 percent (ie, total claims divided by total premiums must be at least 0.6)
- An applicant who is replacing other health coverage with a short-term policy must be provided with an extensive notice about the ins and outs of replacing coverage with a short-term plan.
ACA-compliant rate filings initially included a load for short-term plan expansion, but it was removed in subsequent filing
Highmark Blue Cross Blue Shield of Delaware is the only insurer that offers ACA-compliant individual market plans in Delaware’s health insurance exchange. Highmark’s initial rate filing for 2019 noted that the carrier had “included a 1% load for expected adverse selection due to the Short Term Limited Durational Insurance market expansion based on a recently proposed HHS rule modifying federal requirements.” [since short-term plans really only work for relatively healthy applicants (pre-existing conditions aren’t covered and can result in an application being rejected), the risk pool for ACA-compliant plans was expected to worsen somewhat in 2019 if the state had allowed short-term plans to become a long-term substitute for ACA-compliant coverage.]
But a subsequent filing, submitted in July 2018, included a smaller overall rate increase, and the Delaware Insurance Department confirmed that the proposed premium increase due to the expansion of short-term plans was not included in the revised filing (and the Insurance Department ultimately approved an even smaller rate increase than Highmark had proposed in the revised filing).
Which insurers offer short-term coverage in Delaware?
Several insurers continue to offer short-term plans in Delaware with maximum terms of three months:
- Standard Life
- Companion Life
- Aspen Insurance
For a while, in early 2019, Standard Life was the only insurer offering short-term plans in Delaware. Golden Rule/UnitedHealthcare had offered short-term plans as of October 2018, but had stopped doing so by November. Companion Life and Independence American Insurance Company also offered plans as of October, but their plans appeared were no longer be available as of November (Independence American Insurance Company stopped offering plans in Delaware as of November 15). Everest, Everest Prime, and LifeShield were all still offering short-term plans in Delaware as of November, but their plans appeared to no longer be available as of December.
Several of those companies had started offering short-term plans again by mid-2019, after adjusting their policies to comply with the state’s new rules, and Aspen Insurance is a newcomer to the state’s short-term insurance market.
In 2016, Delaware’s Insurance Commissioner fined Companion Life $487,000 for “numerous violations of Delaware’s insurance code, including misrepresenting its limited benefit and short-term health insurance plans as compliant with the Affordable Care Act.”
Louise Norris is an individual health insurance broker who has been writing about health insurance and health reform since 2006. She has written dozens of opinions and educational pieces about the Affordable Care Act for healthinsurance.org. Her state health exchange updates are regularly cited by media who cover health reform and by other health insurance experts.