Buying short-term health plans in Iowa
- In Iowa, short-term plans can have initial durations of up to 364 days and renewals up to 36 months, but the plans that were for sale until the end of 2019 were limited to 90-day terms.
- New rules took effect in 2019 that impose a variety of requirements on short-term health plans.
- Iowa regulators have approved plans from five insurers (and are considering others) that are compliant with the new rules and are allowed to have terms of up to 364 days. At least one has started marketing their plans as of mid-January.
- In 2018, the Iowa Insurance Division proposed significant new rules for short-term plans longer than three months, but the state’s rules committee did not approve them. The rules that were enacted in 2019 (and effective in 2020) are more lenient.
- Iowa also considered a guaranteed renewability requirement, but that ultimately wasn’t part of the state’s proposed or final rules.
- Five insurers have been approved to offer short-term plans in Iowa under the state’s new regulations. But as of January 2020, none had started marketing the plans.
Iowa allows short-term plans to follow federal rules for duration limits
Iowa’s Insurance Commissioner, Doug Ommen and Iowa Governor Kim Reynolds expressed support for the Trump Administration’s 2018 regulations for short-term plans, which only limit such plans to initial terms of less than one full year and total duration of up to 36 months (as opposed to the Obama Administration rule that limited short-term plans to three months in 2017 and most of 2018).
Iowa regulators clarified in September 2018 that short-term plans in the state would be allowed to follow the new federal rules in terms of how long they can last. Regulators had proposed extensive new coverage mandates as well, and although those were rejected by the rules committee, a less strict version of the new rules was ultimately adopted in early 2019. All short-term plans sold in Iowa as of January 2020 must comply with the state’s new regulations.
As of late 2019, state regulators had authorized three insurers to sell 364-day short-term plans in the state: United States Fire Insurance Company, Golden Rule Insurance Company, and First Chicago Insurance Company. Iowa officials noted that the sale and marketing of those plans were at the carriers’ discretion, but it appeared that none of them were available for purchase as of late 2019 (all of the available plans at that point had term limits of 90 days).
By early 2020, the Iowa Insurance Division announced that a total of five insurers had been approved to offer short-term plans that are compliant with the state’s new rules, with terms of up to 364 days. In addition to the other three insurers that had already been approved, National Health Insurance and Companion Life have been approved to sell short-term plans in Iowa in 2020. The Insurance Division noted that they are working with “several” other insurers that wish to offer short-term plans in the state, so more plans could be approved in the near future. The updated list of approved insurers can be found here.
The Iowa Insurance Division noted that plans that weren’t yet compliant with the state’s new rules (and that were capped at three-month terms) were still available for purchase up until December 31, 2019, and can remain in force until their termination date, which could be as late as the end of March 2020. But those plans can no longer be sold; short-term plans must comply with the state’s new rules in order to be sold in 2020.
Although the state has approved plans from five insurers, only one (National Health Insurance/National General) appeared to be actively marketing the plans as of mid-January (web broker sites also showed a variety of fixed indemnity plans available, but those aren’t the same thing as short-term plans). We checked with the Iowa Insurance Division about this; they noted that although five insurers have been approved to offer short-term plans in Iowa in 2020, the marketing and availability of those plans is up to the insurers and there may be a bit of a lag time before all of the plans are available.
State rules impose a variety of limits and restrictions on short-term plans (but they’re more lenient than the Insurance Division had initially proposed)
Along with the longer allowable term limits, Iowa’s new rules (finalized in February 2019 and effective as of January 2020) impose a variety of restrictions on short-term health plans:
- Benefit maximums must be at least $500,000 for each policy term (for perspective, it’s fairly rare to see short-term plans with benefit caps below this amount; Indiana enacted legislation in 2019 to require benefit caps of at least $2 million on short-term plans; ACA-compliant plans do not have benefit caps).
- A variety of services must be covered, including inpatient care, outpatient care, and prescription drugs (this is important, as it’s common for short-term plans to not cover outpatient prescription drugs at all)
- Out-of-pocket costs must be capped at no more than $30,000. The limit is lower for plans with terms shorter than four months. And for plans that have separate out-of-pocket limits for medical care and prescription drugs, the total out-of-pocket limits cannot exceed $20,000 and $10,000, respectively.
- Pre-existing condition exclusion periods cannot exceed the length of the initial term, and if the plan is renewable, it must be guaranteed renewable (which means pre-existing conditions would be covered in the subsequent terms, but insurers are not required to make their plans renewable).
- Preventive care must be covered after 180 days, although it can be subject to the deductible and other cost-sharing (unlike ACA-compliant plans, which must cover certain preventive care in full, as soon as the plan is in effect).
As described below, the Insurance Division had initially proposed stricter standards, but those were not accepted by the rule committee. The rules that were adopted in early 2019 represent a compromise — they do still impose a variety of requirements that aren’t found in other states, but they’re more lenient than the rules the Insurance Division had initially proposed.
In 2018, the Iowa Insurance Division proposed strict rules for short-term plans of more than 90 days, but the state rule committee rejected them. The rules that were implemented in 2019 are more lenient
Although the Iowa Division of Insurance agreed to allow for longer short-term plans soon after the federal rules were announced, they also proposed extensive coverage requirements, which were slated to take effect in September 2018, for short-term plans that last more than 90 days. The state’s Administrative Rules Review Committee did not approve the proposed rules, however, so they ultimately did not take effect.
The Division of Insurance confirmed in mid-October that they were working with stakeholders to draft new rules, which were implemented in early 2019. As described above, they’re more lenient than the initially proposed rules.
Commissioner Ommen had noted earlier in 2018 that the state was considering regulations to ensure that short-term plans provide comprehensive (“fulsome”) coverage and allow at least one guaranteed renewal. In September 2018, the Iowa Insurance Department published proposed regulations that would have required short-term plans in Iowa to comply with the following requirements, but only if they had terms in excess of 90 days:
- Plans would not have been allowed to have benefit caps of less than $1,000,000.
- The deductible could not have been more than $10,000 (the plan could have had a separate prescription drug deductible of up to $10,000)
- The coinsurance that the member pays could not have been more than 40 percent, and total coinsurance charges could not have exceeded $15,000 per year.
- Coverage for various services would have been required, including:
- Mental health and substance use disorder treatment
- Ambulatory/outpatient care
- Preventive care (including but not limited to vaccines, mammograms, paps, and PSA tests)
- Prescription drugs (including coverage for at least one drug in each US Pharmacopeia category and class)
- Medically necessary durable medical equipment
- All other state mandate benefits under Iowa Code Chapter 514C.
- The plans would not have been allowed to exclude pre-existing conditions.
The rules that were ultimately adopted in early 2019 are more lenient in nearly every category. But they are still more robust than many other states’ rules for short-term health plans. And they apply to all short-term plans, including those with terms of under 90 days (as opposed to the initially proposed rules, which would have only applied to plans with terms longer than 90 days).
Throughout 2019, the only plans available in Iowa were capped at 90 days, as no insurers had started to offer plans that were compliant with the new rules. Those plans, with longer terms, are expected to be available for purchase in 2020 (as noted above, the state has approved policies from five insurers, but none were actively being marketed as of January 2020).
The Insurance Divisions proposed some consumer protections that would have applied to all short-term plans, including those with terms of up to 90 days
Under the terms of the proposed rules (which were not approved by the rules committee), post-claims underwriting would have been prohibited for short-term plans in Iowa. In other words, the insurer would not have been allowed to go back and look at the person’s medical records after they had a claim in order to find pre-existing conditions and rescind the coverage. Instead, medical underwriting would have been limited to only the time period before the policy took effect. And rescission would only have been allowed if the insurer could show that the insured “knowingly and intentionally misrepresented material facts relating to the insured’s health.” (this is the same as the rescission rules that apply to ACA-compliant plans, but short-term plans are not regulated by the ACA).
State hinted that one guaranteed renewal might be required, but that was not part of the state’s initial proposed regulations
In Ommen’s letter to CMS earlier in 2018, he noted that Iowa might opt to make at least one guaranteed renewal mandatory for short-term plans, to prevent an enrollee from ending up uninsured if they develop a pre-existing condition while covered under a short-term plan. The termination of a short-term plan is not a qualifying event, so it would not allow a person to purchase a new, ACA-compliant plan (ie, a plan that covers pre-existing conditions and can’t reject an applicant based on medical history).
But although the Insurance Division proposed numerous other requirements for short-term plans that last more than 90 days, guaranteed renewability was not part of the proposed regulations. The regulations that were adopted in early 2019 do note that renewable plans must be guaranteed-renewable (ie, medical underwriting cannot be used to determine eligibility for the renewal), but insurers are not required to offer renewals.
Which insurers offer short-term plans in Iowa?
As of 2020, the Iowa Insurance Division website notes that only five insurers are authorized to sell short-term plans in the state. The Division noted in September 2019 that residents “should see these approved products entering the market in the coming months at the carrier’s discretion”:
- United States Fire Insurance Company
- Golden Rule Insurance Company (the approved plan includes renewability for up to three years)
- First Chicago Insurance Company.
- Companion Life
- National Health Insurance (National General) – these plans are actively being marketed as of mid-January
Short-term plans with term limits of no more than 90 days (and that weren’t fully compliant with the state’s new rules for short-term health plans) were available from several insurers until the end of 2019, but those plans can no longer be sold.
National General’s plans are for sale in Iowa as of mid-January. Some major short-term web broker sites were still showing no short-term plans available at that point, although this is likely to be a short period of transition before the new plans become available for purchase.
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.