June 21, 2018
Contact: Richard Loconte, 212-709-1691
DFS SUPERINTENDENT VULLO ACTS TO ENSURE THAT NEW YORK HEALTH INSURERS CANNOT ATTEMPT AN “END RUN” AROUND STATE LAW WITH SHORT-TERM PLANS IN THE FACE OF DETRIMENTAL FEDERAL ADMINISTRATIVE ACTIONS
Department of Financial Services Circular Letter Advises Insurers that Potential Change in Federal Law Regarding “Short-Term” Plans Would Not Preempt State Requirements
New York Will Continue to Require Essential Health Benefits and Other Consumer Protection Rather Than Driving Costs Up by Undermining Existing Health Care Markets
Financial Services Superintendent Maria T. Vullo today announced that the Department of Financial Services (DFS) has issued a circular letter reminding insurers and health maintenance organizations (HMOs) that short-term limited duration health insurance plans are prohibited in New York State regardless of potential federal regulatory changes.
“The so-called limited duration health plans envisioned by the Trump Administration’s proposed rule are nothing more than an end-run around the Affordable Care Act to further sabotage the existing health insurance marketplace,” said Superintendent Vullo. “A 364-day health plan is not a short-term policy but is a fiction that is being fabricated to undermine the integrity of the Affordable Care Act and its important consumer protection. Such plans would entice people to buy junk insurance that provide little in the way of genuine coverage and would drive up rates by eroding membership in existing plans. DFS will continue to protect both consumers and our health insurance markets by ensuring that short-term policies remain prohibited in New York.”
The circular letter was issued in response to a rule proposed by the federal Departments of Health and Human Services, Labor and Treasury that would significantly expand the policy term for limited duration policies offered in the individual health insurance marketplace. Under the federal proposal, limited duration plans could be issued for terms of up to one day less than one year. Current federal law permits short-term plans in the individual market only if the term is less than three months. Short-term limited duration plans are exempt from protections afforded consumers under the Affordable Care Act (ACA) including essential health benefits. Short-term plans could, for example, deny coverage for preexisting conditions and impose annual and lifetime benefit limits. New York law prohibits such plans.
In light of the proposed federal rule, the Superintendent is reminding insurers that they must comply with state law requirements mandating individual and small group accident and health plans, regardless of duration, provide comprehensive coverage and coverage for the ACA’s essential health benefits.
Superintendent Vullo also reminded insurers that they must continue to follow the guaranteed renewal requirements under state law. That means that policies cannot be limited in duration and must be renewed at the option of the policyholder or contract holder, except in certain circumstances. Exceptions include such circumstances as non-payment of premiums or when insurers withdraw from the marketplace.
The circular letter is posted on DFS website and may be found here.