Americans will soon have one more alternative to Obamacare, thanks to the Trump administration.
Officials Tuesday proposed regulations that will make it easier to obtain coverage through short-term health insurance plans — which don’t have to adhere to the Affordable Care Act’s consumer protections — by allowing insurers to sell policies that last just under a year. The new rules stem from an executive order President Donald Trump signed in October aimed at boosting competition, giving consumers more choices and lowering premiums.
“Americans need more choices in health insurance so they can find coverage that meets their needs,” said Health and Human Services Secretary Alex Azar. “The status quo is failing too many Americans who face skyrocketing costs and fewer and fewer choices. The Trump Administration is taking action so individuals and families have access to quality, affordable healthcare that works for them.”
The proposal would reverse an Obama administration decision to limit the duration of short-term health plans to no more than 90 days in order to make them less attractive.
Such plans could roil the Obamacare market, drawing healthier consumers away from the exchanges and pushing up the premiums for those who remain.
Short-term health plans, which have been available for years and were originally designed to fill a temporary gap in coverage, are likely to be cheaper than Obamacare policies. But that’s because they are allowed to exclude those with pre-existing conditions and base rates on an applicant’s medical history, unlike plans sold on the Obamacare exchanges.
Also, short-term plans don’t have to offer comprehensive coverage. Typically, they don’t provide free preventative care or maternity, prescription drugs and mental health benefits. They can also impose annual or lifetime limits, meaning they may only pay out a set amount — often $1 million or less — leaving the policyholder on the hook for the rest. And, unlike Obamacare policies, they don’t have to cap consumers’ cost-sharing burden at $7,350 for 2018.
“These proposed short-term plans would actually be long-term scams,” said Brad Woodhouse, director of the Protect Our Care campaign, which supports Obamacare. “The Trump Administration wants to let insurance companies sell skimpy plans to unwitting Americans and then leave them holding the bill if they get sick or hurt. And if you’re among the one in four Americans who has a pre-existing condition, today’s news is especially bad: These skimpy plans will once again allow insurers to discriminate against you based on your medical history.”
Young and healthy folks may like these plans because they come with lower monthly premiums. But those who actually need care could find themselves having to pay more out of pocket for treatment and medications. In fact, some consumers with these plans have complained that they’ve been hit with unexpected expenses.
Also, insurers aren’t required to renew the policies so those who become sick could find themselves unable to sign up again for the same plan.
“People who buy short-term policies today in order to reduce their monthly premiums take a risk that, if they do need medical care, they could be left with uncovered bills and/or find themselves uninsurable under such plans in the future,” wrote Karen Pollitz, senior fellow at the Kaiser Family Foundation, in a recent policy brief.
Have you ever had a short-term insurance policy? What was your experience? Tell us about it here.
Consumers today can find short-term plans that cost as little as 20% of the least expensive Obamacare plan, according to Pollitz.
There were about 160,600 people in short-term plans in 2016, according to the Trump administration, citing statistics from the National Association of Insurance Commissioners.
In its announcement about the proposed rules, the Trump administration said short-term policies are designed to fill a temporary gap in coverage. It will require insurers to notify consumers that the plans are not required to comply with all of Obamacare’s mandates, saying they were committed to making sure people understand the policies’ limitations. The notice directs consumers to make sure they understand what the plan covers and doesn’t cover.
Trump officials countered concerns that these plans could leave policyholders vulnerable by saying that they will provide more options to people, particularly the 28 million Americans who are now uninsured. On a conference call with reporters, they repeatedly said that many consumers had only one choice of insurer in their Obamacare market and that premiums had skyrocketed since the exchanges opened in 2014.
“It’s one step in the direction of providing Americans with health insurance options that are both more affordable and more suited to individual and family circumstances,” Azar said of the proposed regulation.
Administration officials also pushed back on concerns that extending the duraction of short-term plans will hurt the Affordable Care Act market, pointing to an independent actuary’s estimate that only up to 200,000 healthy Obamacare enrollees will switch to short-term plans. But the proposed rule also says that rates will likely rise in the exchanges as a result, which will cost taxpayers up to $168 million more in higher premium subsidies.
One of the main insurance industry groups voiced its concern about the impact of the proposal.
“While we are reviewing the proposed rule to understand its impact on the people we serve, we remain concerned that expanded use of short-term policies could further fragment the individual market, which would lead to higher premiums for many consumers, particularly those with pre-existing conditions,” said Kristine Grow, spokeswoman for America’s Health Insurance Plans.
The administration will accept comments on the proposed rule for the next 60 days. It is seeking input on whether these plans should be available for more than 12 months and on which options consumer should have if they want to renew their coverage.
Those with short-term policies are not considered insured under the Affordable Care Act and are subject to the penalty for not having coverage. But this will not be an issue after this year since Congress effectively eliminated the individual mandate — which requires nearly all Americans to be insured or pay a penalty — starting in 2019 as part of its tax overhaul bill.
The proposed regulations are the latest step in the Trump administration’s quest to weaken Obamacare. Last month, officials unveiled a proposed rule that would make it easier for small businesses — and some self-employed folks — to band together and buy health insurance. That proposal also stemmed from Trump’s executive order and is designed to broaden access to what are known as association health plans.