Don’t Divorce Americans From Short-Term Health Insurance

More than 800,000 Americans divorce each year. Many more change jobs or otherwise have their employment status interrupted.

Getting divorced or losing a job is hard enough. Unfortunately, the Obama administration wants to make it even harder. It’s looking to implement a new rule that would curb short-term health insurance policies that many divorcees, job-hoppers and others rely on to get through major life transitions.

The administration isn’t cracking down on these policies in a paternalistic bid to protect down-on-their-luck consumers. Its intentions are far more cynical. The feds are aiming to shore up Obamacare’s faltering finances by forcing healthy people out of their low-cost short-term plans — and into high-deductible, high-premium exchange coverage.

Short-term health plans typically last up to just short of a year and cover fewer medical services. The plans also aren’t required to accept all applicants, in contrast to more conventional coverage available through the exchanges.

Those who opt for short-term plans may be between jobs. Or they might no longer have access to insurance through their former spouses’ employers. Or they may have retired before they turned 65 — and thus are not yet eligible for Medicare.

Sometimes, it’s just a matter of cost. Short-term policies typically limit coverage to basic care like doctors’ visits, lab tests and emergency care. So they’re far more affordable than Obamacare’s “qualified health plans,” which must cover a variety of essential health benefits like prescription drugs, maternity counseling, colonoscopies and other tests, as well as rehab services. Short-term policies generally sell for less than half the cost of Obamacare plans, according to AgileHealthInsurance, an online seller of such policies.

Short-term, minimalist policies are especially attractive to younger, healthier Americans who are unlikely to need extensive medical care and may not want to purchase an expensive exchange plan.

Robin Herman, a 34-year-old California business owner and mother of two, told the Wall Street Journal earlier this year that the plans offered on Obamacare’s exchanges were “just not affordable.” Her decision to purchase a short-term policy for her own health needs, “is saving me a ton of money for the year.”

Thousands of other people have similarly turned to short-term coverage as an affordable alternative to Obamacare’s comprehensive — and expensive — plans. Online insurance broker eHealth has seen sales of short-term policies more than double between 2013, the year before Obamacare’s exchanges opened, and 2015. For HealthMarkets Inc., another major insurer, sales of short-term policies rose by roughly 150 percent in that same period.

Instead of lauding these plans for getting more people covered, the Obama administration is trying to stomp them out. In June, the Department of Health and Human Services proposed a new rule limiting short-term policies to a maximum of three months of coverage.

Anyone requiring coverage for longer than a few weeks will face a choice: Either purchase an expensive Obamacare-compliant plan or forgo coverage altogether.

The administration’s motives are clear. Obamacare was expressly designed to force young, healthy people to buy far more coverage than they might need through the exchanges in order to subsidize coverage for older consumers.

The Congressional Budget Office estimates that 40 percent of enrollees must be young and healthy for the exchanges’ financing scheme to work. At present, less than one-third of exchange customers are under 35.

Regulators want to force young adults into the exchanges by eliminating one of their lower-cost options: Short-term policies. If they’re successful, millions of Americans would lose insurance plans they like, courtesy of Obamacare.

Given the skyrocketing cost of exchange plans, it’s no certainty that they’ll act as the administration intends. After all, the penalty for going without coverage altogether is just $695 or 2.5 percent of income, whichever is higher. Paying that fine may be more cost-effective than purchasing exchange coverage.

In the end, the administration’s ban on short-term plans could lead to fewer people with insurance.

Breaking up is hard to do. The administration shouldn’t make it harder by taking away consumers’ short-term health policies.

Nothing contained in this blog is to be construed as necessarily reflecting the views of the Pacific Research Institute or as an attempt to thwart or aid the passage of any legislation.

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