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In its latest move to roll back Obama-era health insurance rules, the Trump administration announced a plan that would make it easier for consumers to buy cheaper insurance that offers fewer benefits and protections.
A proposed rule unveiled Tuesday by the Department of Health and Human Services would allow insurers to make a type of temporary insurance known as short-term limited duration plans available for up to 12 months, instead of the current maximum of just three months.
The plans, which offer less robust coverage than is currently required by the Affordable Care Act, were originally intended as stop-gap coverage for those between jobs or without coverage temporarily because of a life event.
But the change, which could take effect as soon as next year after a public comment period, would allow people to use the health plans for year-round coverage.
The plans can be significantly less expensive and so potentially more attractive to some younger consumers who might feel they only need minimal coverage. Consumer advocates worry the plans would not only leave people without needed coverage but also draw enough people away from the ACA exchanges to drive up health insurance costs for people who want or need to buy more comprehensive coverage.
Under the ACA, insurers must offer health insurance to everyone, regardless of their health status, so they are guaranteed comprehensive coverage. There is currently no such requirement on short-term health insurance plans.
And the policies are cheaper because they offer far fewer benefits. Everything from maternity care and prescription drugs to mental health care can be excluded. If you have a preexisting health condition, the insurer would be allowed to charge you more or deny coverage altogether. And if you are diagnosed with even a minor health problem after the policy starts, the company can later refuse to renew your insurance.
The Trump administration says expanding the short-term health insurance plans will give more options to people who find their current insurance premiums unaffordable. In the past few years, premiums on plans sold through the ACA exchanges have skyrocketed. For 2018, monthly premiums are on average 35 percent higher than in 2017 on the lowest cost Silver plans sold on ACA marketplace.
While about 85% of people who buy health insurance on the exchanges get subsidies based on their income that significantly reduce the cost of premiums, millions of middle-income people who don’t get insurance through their job, Medicaid or Medicare are struggling to afford health insurance.
“This is one step in the direction of providing Americans health insurance options that are more affordable and more suitable to individual and family circumstances,” says Alex Azar, the new head of Health and Human Services, who spoke with reporters Tuesday.
Back to the Past
This type of insurance existed long before the ACA was implemented in 2014. Under the law, the policies became less attractive because they did not meet the law's mandated coverage requirements, meaning people who bought them had to pay a penalty.
That is no longer true. In December, as part of a Republican tax plan that President Trump signed into law, the penalty on people who don't buy ACA-approved health coverage was eliminated, starting next year.
These new plans are unlikely to be available until 2019. The proposed rule is out for public comment for 60 days, and HHS could make changes based on those comments. It would then take another few months for the rule to be implemented.
Some health policy experts and an array of consumer advocates and patient groups say expanding short-term insurance plans won’t solve the affordability problem, especially for people who have health issues and want comprehensive insurance.
“These are very narrow plans and will be attractive to people who are healthy or don’t understand their limitations,” says Linda Blumberg, a senior fellow in the Health Policy Center at the Urban Institute. “If you do get sick, you may not be able to afford or access the care you need.”
Blumberg says a better solution would be to expand the tax credits to subsidize insurance for more lower- and middle-income people. Currently, an individual who makes more than $48,000 a year doesn’t get any subsidies to buy health insurance through the ACA exchanges.
Blumberg says expanding availability of short-term plans will create other problems that could drive up insurance costs for individuals.“This will draw healthy people out of the individual market and leave those who remain with higher-cost policies,” says Blumberg. She says it also could prompt more insurers to leave the ACA individual marketplace because the people who remain in it are likely to be sicker and more costly to insure.
HHS estimates that 100,000 to 200,000 people would choose to leave the individual health insurance market and buy the less comprehensive plans. On average, that would boost the cost of an individual policy on the ACA exchanges to $718 a month, up from $649 a month, based on HHS projections.
Even groups that welcome the rule change caution that HHS needs to do more to protect consumers who buy these plans.
Chris Pope, a senior fellow at the Manhattan Institute, which has called for loosening restrictions on short-term plans, said HHS should ensure that people who buy short-term policies are guaranteed to renew them when the 12-month policy expires.
Blumberg says that won’t help people who are sick and costlier to insure though. “Even if you are guaranteed the ability to renew your policy, there’s no limit on what you can be charged,” she says.
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