Trump’s “short term” health insurance plans look cheap but they could drive up costs for everyone else

The Trump administration just moved to make short-term, risky health care plans a whole lot more permanent.
August 1, 2018, 12:15pm

The Trump administration unveiled a rule Wednesday that makes it a lot easier for consumers to opt for cheaper, short-term health insurance plans.

These short-term plans used to just be that: an easy, usually temporary fix to cover consumers as they switched jobs or suddenly lost coverage. These plans don’t have to comply with ACA regulations, meaning providers can deny coverage based on pre-existing conditions, and often don’t cover essential benefits like maternity care or prescription drugs. The Centers for Medicare & Medicaid Services said that’ll be made clear to customers.

These plans could be enticing for healthy people who want to cut costs and skip the Affordable Care Act marketplace. It could also spell trouble for sicker people that will be at risk of rising premiums, but are often shut out of the short-term plans.

So, the insurance market could get even more complicated.

“They’re ostensibly trying to provide more choices to very healthy people, but the people who will be most adversely affected are those who need insurance the most,” Linda Blumberg, an institute fellow at the Urban Institute’s Health Policy Center, told VICE News.

The rule, released Wednesday morning, reverses an Obama-era regulation that trimmed the maximum duration of short-term plans to three months. Under the Trump administration’s move the plans can now be available for up to a year, and some consumers will be able to renew those short-term plans for up to three years.

Some of this policy maneuvering appears to be about knocking the legs out from under Obamacare. As the CMSnoted in a news release: “This action will help increase choices for Americans faced with escalating premiums and dwindling options in the individual insurance market.”

Right now, the plans appear attractive -- especially to young, healthy people that make too much money to qualify for government subsidies to help them pay for ACA plans. The average monthly premium for a customer getting a short-term plan in the fourth quarter of 2016 was about $124, compared to nearly $400 for an unsubsidized Obamacare plan, according to CMS.

With those lower premiums, the new rule will likely increase the number of people leaving ACA-regulated coverage. The expansion of short-term plans will increase the amount of people without minimum essential coverage by 2.5 million next year, according to an analysis from the Urban Institute, especially since the individual mandate will vanish in 2019. Over the next decade, 1.4 million people could enroll in short-term plans, according to CMS. The agency expects the number of people enrolled in the plans will increase by 600,000 next year.

“Pre-ACA, these were the plans that were sold to college students: catastrophic plans that didn’t have all the essential health benefits that are required by the ACA,” Mark Fendrick, director of the Center for Value-Based Insurance Design at the University of Michigan, told VICE News. “It’s always good to have options, but there are larger insurance market effects that worry me.’

The Urban Institute said this migration could ultimately increase premiums for everyone else in ACA plans. Obamacare plans could rise an average of 18.2 percent in 2019 across the 43 states that don’t prohibit or limit short-term plans, since the remaining pool of customers will be those that require more expensive care.

“These plans aren’t for everyone, but they can provide a much more affordable option for millions of the forgotten men and women left out by the current system,” Health and Human Services Secretary Alex Azar said in a statement on Wednesday.

In the rule, CMS noted that some people had filed public comments saying the short-term plans could “subject patients to catastrophic medical bills and medical bankruptcy.” The plans are already effectively banned in states including New York, New Jersey and Massachusetts, according to Bloomberg News.

“These new short-terms #junkplans are so dangerous for Americans that it's no wonder not a single group representing patients, physicians, nurses or hospitals has voiced support. Democrats will do everything in our power to stop this,” Sen. Chuck Schumer (D-NY) said in a tweet.

Cover image: U.S. President Donald Trump (C), flanked by the families of business people he says were harmed by Obamacare, high-fives a young boy as he arrives to deliver remarks on the U.S. health care system at Cincinnati Municipal Lunken Airport in Cincinnati, Ohio, U.S. June 7, 2017. (REUTERS/Jonathan Ernst)