While the federal rules made it easier to sell STLDs, state laws still applied further parameters to sales of the product. Following the Trump administration’s changes in the federal regulation of STLDs, many states were not slow to impose their own individual state restrictions on STLDs. California, Massachusetts, New York and New Jersey took action to ban or eliminate the sale of STLDs in their state. Other states restricted the length of the permitted term of the product to something less than permitted under federal law. These states include Arizona, Colorado, Connecticut, Delaware, District of Columbia, Illinois, Indiana, Louisiana, Maryland, Michigan, Minnesota, Nevada, New Hampshire, North Dakota, Oklahoma, Oregon, South Dakota, Vermont and Virginia. A few other states allowed existing legislative limits on plan terms and renewals to stand or restricted the ability to renew federally compliant plans (Idaho, Kansas, Missouri, Maine, Ohio, South Carolina, Utah and Wisconsin). On the other end of the spectrum, some states saw the loosening of the federal requirements as a helpful opportunity to advance consumers’ ability to purchase STLDs, and sales of federally compliant STLDs in these states are continuing. For those states where sales of STLDs are continuing, states may also require disclosures regarding the scope of coverage in addition to and in more detail than the federally-required disclosures on the policy form.
As noted above, the preponderance of states has resisted or at least imposed some governors over the sale of STLDs within their jurisdiction. However, states’ efforts to discourage the sale probably will not stop with just this legislation and rule making. As mentioned above, many STLD products are usually sold through associations, and are sometimes known as association health plans. An association can purchase a STLD in a state where STLDs are permitted, and there are reports that the associations then solicit new members in other states, including states whose laws may restrict STLDs. We expect that states may either legislate against these sales and/or state Departments of insurance may challenge the sales as violations of other laws that require the filing of products and their rates issued in their state.
However, because rule making and legislative efforts take time, many state Departments of Insurance are moving in the interim to educate consumers in their state about the differences between ACA compliant products and STLDs. The Georgetown University Health Policy Institute’s Center for Health Insurance Reforms conducted a study of Department of Insurance websites to see what information was available for consumers regarding short-term plans, and reported the following on a December 17, 2018 blog:
We found that at least 17 state insurance departments had published press releases, consumer alerts, and other consumer-facing resources to inform consumers about short-term plans since the final rule went into effect. Almost all states that issued information about short-term plans cautioned consumers that short-term plans were allowed to exclude coverage of pre-existing conditions, and that they generally cover less than ACA-compliant plans. Further, over half of the consumer alerts we read noted that short-term plans are meant to fill a temporary gap in coverage. Many also indicated that short-term plans do not have to comply with the ACA.
Finally, states also have the ability to investigate, examine and monitor insurance brokers and insurers who are selling STLDs to be certain that the scope of coverage and other information is accurately represented. And because every state has adopted some version of the unfair trade practices, states may even prosecute insurance brokers and insurers selling STLDs on grounds of misrepresentation if they believe that the marketing, sales and disclosure have been misleading. Specifically, the regulators can charge these entities with misrepresenting the STLDs as being comparable to ACA –compliant health plans.
The examples above – restrictions on sale or just restrictions on the product duration, required written disclosures, consumer education and strict enforcement of the state’s unfair trade practices are not the only means at the state’s disposal to regulate sales, although they are perhaps the most obvious and are already in use in a number of states. If the market continues to grow, and if regulators see an upswing in complaints about these products, the industry should expect to see regulators step up their efforts at regulation with all the tools at their disposal.
*Elizabeth Tosaris is based in Locke Lord LLP’s San Francisco office and has practiced in insurance law for nearly thirty years.
 Commissions on STLDs often pay 20% or more. Health News, NPR, Julie Appleby “Short-Term Health Plans Boost Profits For Brokers and Insurers” December 21, 2018.
 Executive Order 13813, Issued October 12, 2017
 Because the federal government has given states primary authority over the regulation of insurance, further restrictions on sales of a product allowed under federal law is a permissible exercise of state authority.
 Commonwealth Fund, “Short Term Health Plans Sold Through Out-of-State Associations Threaten Consumer Protections” by Emily Curran, Dania Palanker and Sabrina Corlette. January 31, 2019.