Exchange plan premiums will rise an average of 15 percent next year, according to a Congressional Budget Office analysis released this past Wednesday.
Congressional Democrats blamed the president. Sen. Mark Warner, D-Va., tweeted that the rate hike is “largely due to Trump Administration sabotage of the health insurance market.” Senate Majority Leader Chuck Schumer also took to Twitter, bemoaning the “Trump-GOP sabotage” and complaining that the “Trump admin’s expansion of #junkplans will leave millions more Americans susceptible to denied coverage & medical bankruptcy.”
They’re both mistaken, as the CBO report itself makes clear. The Obama administration is to blame for skyrocketing premiums. And the short-term “junk plans” Sen. Schumer maligns would offer consumers affordable insurance and actually increase the number of people with coverage.
Obamacare’s onerous regulations imposed huge costs on insurers. It’s expensive for plans to cover everything from prescription drugs to pediatric dental care, as the law’s “essential health benefits” mandates direct them. Guaranteed issue and community rating — which order insurers to sell coverage to all comers, regardless of health status or history, and forbid them from varying premiums according to anything but age, geography, and tobacco usage — also drive up the cost of coverage.
To offset these costs, insurers repeatedly hiked premiums while President Obama was in office. By the fall of 2016 — before President Trump won the election — insurers had already set eyewatering prices for 2017 coverage. Average premiums for individual policies sold on the federal operated HealthCare.gov exchanges were more than double the average individual-market rates in 2013, the year before most of Obamacare took effect.
It’s disingenuous for congressional Democrats to imply that huge rate hikes are a new phenomenon. The Trump administration is not sabotaging the nation’s insurance system — it’s trying to make health plans more affordable. That’s the intent behind the administration’s recent proposal to expand access to short-term plans.
These plans aren’t subject to many of the regulations that have sent exchange premiums soaring. As a result, they’re significantly cheaper. The average premium for a short-term individual plan at the end of 2016 was only $124 per month. Obamacare-compliant plans, on the other hand, cost an average of $393 per month.
For most of President Obama’s tenure, people could purchase short-term plans that lasted up to 364 days. But as exchange plans grew more and more expensive, people started choosing short-term plans in droves. Enrollment in short-term plans surged 150 percent between 2013 and 2015.
The Obama administration feared that people would continue to opt for short-term plans — and thus deprive the exchanges of healthy enrollees. So in late 2016, the administration prohibited insurers from selling short-term plans that lasted longer than three months.
These ultra-short plans are too risky for many consumers. If people suddenly develop serious illnesses, insurers might not renew their coverage. And Obamacare generally only allows people to sign up for insurance at the end of each year. So a person with a short-term plan faces the possibility of seeing his coverage run out — and having no other options on the market, simply because of bad timing.
The rule had the effect of forcing people to choose high-priced Obamacare plans — or go without insurance altogether.
The Trump administration’s proposed rule, which could be finalized this summer, would effectively cancel the Obama-era regulation and allow insurers to once again sell short-term plans that last just shy of one year.
Obamacare’s partisans worry the rule would destabilize the exchanges and lead to huge rate hikes.
Some people — particularly healthy ones — would indeed jump at the chance to pay less for coverage. The new CBO report predicts that 2 million additional people will enroll in short-term plans by 2023 if the proposal is enacted. The rule “would decrease the number of uninsured people by roughly 1 million in 2023 and each year thereafter,
with the majority of the previously uninsured enrolling in [short-term] plans,” according to the CBO analysis.
But the rule won’t substantially ‘increase premiums for those who remain in the exchanges. The CBO report projects that premiums will be just “2 percent to 3 percent higher” as a result of the rule.
These modest hikes won’t affect most exchange enrollees. An estimated 83 percent of marketplace customers received premium subsidies in 2018. If premiums rise, so too will these subsidies, leaving the vast majority of exchange enrollees financially unscathed.
Perhaps the left’s most desperate argument against the proposed short-term rule is that it would harm taxpayers. This too is false.
The federal government would spend slightly more per exchange enrollee — but less overall because there’d be fewer total enrollees in need of subsidies. The short-term rule, coupled with a similar rule governing association health plans, “would reduce the federal deficit by roughly $1 billion over the 2019–2028 period,” according to the CBO.
The short-term health plan reform is a welcome attempt to save consumers money and restore choice to the insurance markets. As Health and Human Services Secretary Alex Azar put it, “We’re just trying to make options available.” That Obamacare’s proponents could mistake this for “sabotage” shows just how misguided they’ve become.