Choice Stories

August 1, 2018

California Legislature Acts to Ban Short-Term Health Plans

 
  • Short-term health plans that do not comply with the Affordable Care Act would be prohibited in California effective in 2019.
  • California’s action mirrors short-term plan limitations or prohibitions taken by other states.
  • Governor Jerry Brown has until September 30, 2018, to sign or veto the proposed legislation.
 

The California Assembly and State Senate both took action this month to ban the sale of short-term health insurance plans in 2019. The Senate approved S.B. 910, authored by State Sen. Ed Hernandez (D-West Covina), on August 21 after the Assembly approved the measure on August 16. The legislation now heads to the governor.

The Trump administration has been working to expand the availability – and the coverage period – for short-term health insurance plans. Recently released federal guidelines would expand short-term plans from 90 days to 12 months. Insurers would have the option to allow individuals covered by these plans to renew them for up to 36 months. States have the option to regulate the sale of such plans, which California is doing.

Under the Affordable Care Act (ACA), short-term health plans do not have to include all of the “essential health benefits” of ACA-compliant plans. For example, short-term plans can exclude maternity care and prescription drug coverage, among other benefits. They can also deny an applicant coverage if he or she has a pre-existing health condition.

For years California limited the length of time an individual can be covered by a short-term health plan to six months. The Obama administration reduced the coverage period to three months. Under S.B. 910, the sale of non-ACA compliant short-term health plans in California is no longer permitted effective January 1, 2019.

The impact of the change could be minimal, although it’s not known how many residents might have been attracted to the plans under the broader federal rules. According to the California Department of Insurance, fewer than 10,000 short-term health insurance policies were in force at the end of 2017.

If Governor Jerry Brown signs the bill, California would join a handful of other states, including Massachusetts, New Jersey, and New York, which have severely restricted or banned short-term health plans. Beginning in 2019, Californians could still purchase limited-term health policies; however, they would have to comply with the ACA’s consumer protections and essential health benefits.

Talk with your employee benefits broker about short-term coverage options for your employees if they leave your group health plan. If your group has 20 or more employees on more than 50 percent of your typical business days in the calendar year, you are subject to COBRA (the Consolidated Omnibus Budget Reconciliation Act), and you may be required to offer coverage continuation to employees, spouses, and dependent children who lose coverage due to certain events. These include death, employment termination, reduction of hours (and qualification for benefits), eligibility for Medicare, divorce, or legal separation.