California Outlaws Short-term “Junk” or “Skinny” Insurance Policies Starting January 1, 2019

On September 22, 2018, Governor Brown signed a package of healthcare bills, including Senate Bill (“SB”) 910, which bans short-term limited duration health insurance policies, commonly referred to as “junk” or “skinny” insurance policies. The bill makes it unlawful for any health insurer to sell any “short-term limited duration health insurance” to California residents.

“Junk” insurance policies are short-term policies that are generally cheaper but offer less coverage than other policies and do not cover all the benefits covered under the Affordable Care Act (“ACA”). These short-term plans often have high deductibles and do not cover essential health benefits, like cancer treatment, maternity care, and substance-use treatment, and often cover few prescription medicines. They may also deny coverage altogether to individuals with pre-existing conditions, such as allergies, asthmas, and diabetes, and may have annual and lifetime limits on benefits.

Individuals who buy “junk” or “skinny” insurance policies are often surprised later to find out they do not cover essential and necessary medical treatments. Moreover, because individuals who purchase short-term plans are less likely to participate in state healthcare exchanges, short-term plans tend to draw younger or healthier consumers out of Covered California, the state’s ACA insurance marketplace. This destabilizes and increases healthcare costs and premiums for the majority of workers, families, businesses, self-employed entrepreneurs, and other Californians who purchase quality, affordable insurance through Covered California.

Because of these concerns, the Obama Administration previously issued regulations that placed restrictions on these short-term policies or built in safeguards.

In contrast, the Trump Administration seeks to expand these “junk” or “skinny” insurance policies. Recently, the Trump Administration directed federal agencies to expand the availability of short-term policies, and issued regulations expanding short-term policies to up to 12 months and allowing them to be renewed for up to three years. These regulations take effect in October 2018. These actions are just one more way the Trump administration is trying to undermine and eventually collapse the protections that everyday working people have under the ACA.

To protect Californians from being lured away from quality, affordable plans that provide real protection and benefits, the California Legislature passed SB 910 prohibiting short-term limited duration health insurance policies from being sold in California. Californians, however, will still be able to buy short-term emergency coverage that complies with the minimum essential coverage requirements of the ACA, if they are between jobs for example, through Covered California or directly from health insurers.

SB 910 takes effect on January 1, 2019.

By Alejandro Delgado and Adam Thomas | October 24, 2018

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