The Trump administration is preparing to offer Americans an affordable alternative to the high-cost coverage on Obamacare’s exchanges by overturning one of the previous administration’s most burdensome regulations.
On February 20, the Department of Health and Human Services released a proposed rule based on President Trump’s October 12, 2017, Executive Order that would allow insurers to sell “short-term” health plans that provide coverage for up to 364 days. The proposed rule is open for comment for 60 days. The measure would nullify an Obama administration directive issued in October 2016 that banned short-term plans lasting longer than three months.
Short-term plans are much less expensive than plans sold on the state and federal insurance exchanges because they aren’t subject to Obamacare’s premium-inflating mandates.
For instance, they don’t have to comply with the “community rating” rule, which prohibits insurers from charging sick enrollees more than they charge healthy ones. They also don’t have to comply with the “guaranteed issue” mandate, which forces insurers to offer coverage to any willing buyers, no matter how sick and costly they may be.
At the end of 2016, the average monthly cost for a short-term plan was only $124. By comparison, an unsubsidized Obamacare-compliant plan that year cost an average of $393 per month.
Obamacare’s proponents refer to short-term plans as “junk insurance” because they only cover the bare necessities, like doctor visits and emergency care. They may not cover all ten of Obamacare’s “essential health benefits,” such as prescription medicines or substance abuse treatment.
Prior to October 2016, many healthy Americans who felt they needed just minimal coverage opted for cheap, 364-day short-term plans. Between 2013 and 2015, sales of short-term plans grew by more than 150 percent. They offered a valuable escape hatch from Obamacare’s costly exchanges for those who did not have employer-based coverage.
This was unacceptable to the Obama administration. The exchanges were struggling to attract customers. In 2016, 12.7 million Americans purchased coverage on the online marketplaces — far fewer than the 21 million enrollees the Congressional Budget Office had forecast in 2010.
So the administration decided to cripple short-term plans by limiting their duration to three months. That made these plans extremely risky. Here’s why.
Insurers are allowed to “medically underwrite” short-term plans. That means that they can charge sick people market prices. Or they can refuse to sell plans to people with serious illnesses.
So if a healthy person bought a three-month plan and then fell ill, his insurer might decline to renew his plan when the contract came up. Sick patients would become uninsured at the very moment they needed coverage most. And they’d remain uninsured until the next individual-market open enrollment period, which could be up to nine months away.
The intent was to force people into Obamacare’s exchanges. People were presented with a choice of pricey exchange insurance — average mid-level “silver” plan premiums on HealthCare.gov rose by 25 percent in 2017 and another 34 percent in 2018 — or no insurance at all.
With short-term plans rendered useless, and Obamacare-compliant plans increasingly unaffordable, many Americans decided to go without insurance. Only 11.8 million people enrolled in exchange plans for 2018. That’s a 3.7 percent decrease from 2017 and nearly 1 million fewer enrollees than 2016. Forty-five percent of uninsured Americans cited cost as the reason they lack coverage, according to a recent Kaiser Family Foundation survey.
The Trump administration’s proposed rule would put low-cost coverage options back on the table. Health and Human Service Secretary Alex Azar said the plans, if approved, could become available later this summer or early this fall. “[F]or Americans who have been priced out of Obamacare plans, who can’t find a plan that will cover their doctor, or who are looking for affordable coverage between jobs, these short-term plans could make a lot of sense,” he wrote in an op-ed for CNN.com.
People would once again be free to use short-term plans as an alternative to high-priced exchange policies. The administration estimates that between 100,000 and 200,000 Americans will abandon their marketplace coverage for a short-term plan in 2019.
Many currently uninsured people could also buy cheap, short-term plans to guarantee themselves at least some protection in the event of a medical catastrophe.
By restricting short-term plans, the Obama administration proved it was more interested in propping up its health law than helping Americans obtain affordable coverage. Restoring access to affordable short-term health plans is a common-sense way to put patients before politics.