Under the new proposal, households can purchase the more limited plan for a year — up from three months.
If this proposal goes through — and the chances are very high that this regulatory change will ultimately be finalized — it could cause enormous damage to the Affordable Care Act, while at the same time not do a thing to help people with the increasingly high cost of health insurance.
That’s not what the Trump administration says, of course. Officials claim people will find it easier to afford health insurance under the new rules. As Seema Verma, administrator for the Centers for Medicare and Medicaid Services, tweeted out this morning:
The short-term plans are currently limited to three months of use. The ACA originally intended them as stop-gap coverage — if, say, someone is in-between jobs or transitioning between work and school. The ostensible goal of lengthening that period is to extend coverage to people who are currently not covered by the ACA — because they cannot afford the premiums — by creating longer-term cheap insurance options.
It’s true that these plans will be cheaper than typical insurance. But there is a reason for that. As Sabrina Corlette, senior research fellow at Georgetown University’s Center on Health Insurance Reforms put it to me Tuesday: “The first thing for people to know is that these plans are not health insurance.”
As Corlette explained, under the ACA, insurance companies have a lot more leeway with the short-term plans. They can screen people for preexisting conditions — and either charge them more or refuse to offer them a policy entirely. The short-term plans don’t need to offer coverage for things such as prescription drug coverage, maternity care and mental-health services. They can impose an annual or overall lifetime limit on how much they will cover.
All of these things are prohibited for ordinary plans under the ACA. And so, by trying to expand the period the shorter-term plans can be utilized by consumers (by the way, the administration is also contemplating allowing people to renew the plans), the administration is essentially setting up a parallel system to the ACA, and one that allows insurance companies to offer much skimpier plans in the way of benefits.
The problem is that these plans could be utilized by a much larger group of people — not just those who currently lack insurance. That’s because younger and healthier people — who rarely view themselves as vulnerable — may also seize on them, rather than opt for the more robust plans. “These plans are likely going to be appealing to younger and healthier folks,” Corlette said.
But these are exactly the sort of people the exchanges need. Here’s why: If a lot of young and healthy people don’t get insurance on the exchanges, that will leave behind people who are older and sicker, driving up premiums. As Corlette explains: “On the market level, if these short-term plans siphon off healthier people, it will be sicker people who remain on the market. That will, over time, drive insurance costs up.”
It’s hard to say what the impact of this could be. On the one hand, Corlette notes, it’s possible many people who receive significant subsidy help from the government could remain enrolled despite higher premiums, because their subsidies would rise along with the premiums. That might help preserve the exchanges, albeit in a weaker form.
But it’s also possible that the result could be more damaging. Corlette notes that the potentially sicker, older pool of customers remaining in the market for health-care coverage through the exchanges might not be the most enticing group for the insurance companies. More could pull out of the exchanges, leaving remaining would-be customers with fewer choices — or none at all.
The new move could create another problem as well. The way the subsides for lower income people getting coverage on the exchanges were set up — stopping for people needing health insurance at 400 percent of the federal poverty limit — effectively left an estimated seven million to eight million people who get coverage on the exchanges without access to those subsidies.
According to Corlette, it’s all but certain those people who are ineligible for subsidies and aren’t young or healthy enough for the more limited — and, again, extremely inadequate — plans are the ones who would get hit by premium increases next year when the new regulations siphon the younger and healthier people out of the individual markets. “These are folks who are working, and trying to do the right thing, and trying to get insurance,” Corlette said. “They are being priced out of the market, and this is going to make it worse.”
So this could end up helping to do what President Trump has wanted to do all along — take a wrecking ball to President Barack Obama’s signature accomplishment. Trump failed in his attempt to repeal the Affordable Care Act last year. But, like a villain in a horror movie, he keeps coming back for it — again, and again, and again.