The new rules are the second tool the administration has devised lately to foster low-price insurance that circumvents the ACA’s coverage requirements and consumer protections. In June, the Labor Department issued rules that will make it easier for small companies to buy a type of insurance known as association health plans and, for the first time, allow them to be sold to people who are self-employed.
The pair of rules carry out an executive order signed by President Trump in October that directed agencies to broaden access to these two small niches in the insurance market to promote “a health-care system that provides high-quality care at affordable prices for the American people.”
In issuing the latest rules with a media blitz, administration officials characterized them as a major step toward fulfilling the president’s promise to widen insurance choices. Health and Human Services Secretary Alex Azar made three morning television appearances.
The short-term plans “may not be the right choice for everybody,” Azar said at an afternoon news briefing. But, he said, “we believe strongly in giving people options here.”
Azar and other federal health officials predicted short-term, limited-duration plans will appeal mainly to middle-class people who do not qualify for government subsidies for ACA health plans — especially people who are young or healthy. With the law still in place despite Trump’s and congressional Republicans’ hostility toward it, “we are looking to do everything we can to take incremental steps that will make insurance coverage more affordable,” said Jim Parker, director of HHS’s Office of Health Reform.
In the months since the idea surfaced, it has elicited a wall of opposition from the health insurance industry, hospitals, doctors and patient advocacy groups. All have warned that consumers with bare-bones plans would be stranded when they need care — and that the defection of healthy customers from ACA marketplaces would drive up prices for those who remain.
On Wednesday, health policy experts from the conservative Heritage Foundation and libertarian Cato Institute lauded the change.
But Topher Spiro, vice president for health policy at the liberal Center for American Progress, derided the health plans as “junk insurance” and “the Trump University equivalent of health insurance.”
And the American Lung Association’s president, Harold Wimmer, said short-term policies provide inadequate coverage for people with diseases such as asthma or lung cancer. “Lung disease patients need access to treatment to be able to breathe,” he said in a statement.
While praising the administration’s effort to promote insurance choices, Matt Eyles, president of America’s Health Insurance Plans, an industry trade group, said, “We remain concerned that consumers who rely on short-term plans for an extended time period will face high medical bills when they need care that isn’t covered or exceeds their coverage limits.”
Congressional reaction split along partisan lines, with Republicans cheering on the administration and Senate Minority Leader Charles E. Schumer (D-N.Y.) vowing that “Democrats will do everything in our power to stop this.”
Short-term insurance policies go further than the association health plans in the ways they are exempt from parts of the 2010 health-care law that are meant to protect consumers from shoddy insurance that disadvantages consumers who need it most.
Both types of insurance can sidestep the ACA’s requirement that health plans sold to individuals and small businesses must include 10 categories of benefits, including maternity care and mental-health services. Both can have bigger price differences between older customers and younger ones. But only the short-term plans also can charge higher prices to customers with medical conditions that require care, refuse to sell them a policy, or exclude coverage of health problems that a customer had before buying the insurance. The ACA bans such practices.
Making it easier to buy health plans that avoid the law’s protections is part of a strategy by Trump and his aides of relying on executive powers to undercut aspects of the ACA, whose demolition has been one of Trump’s central goals since his 2016 campaign. Since the Republican-led Congress was unable to repeal large parts of the statute last year, the administration has ended a significant subsidy for ACA insurers and slashed federal spending on advertising and in-person help to encourage consumers to sign up through insurance marketplaces created by the law.
Short-term health plans have long existed, and their rationale was to provide temporary coverage for people who are between jobs or have other brief needs for inexpensive insurance.
During Barack Obama’s presidency, health officials became concerned that, as premiums for ACA health plans were becoming more expensive, some people were starting to rely on these alternatives as an end-run around the comprehensive coverage the law was designed to promote. In response, Obama-era health officials in 2016 restricted the short-term policies to three months.
Rescinding that is the central change the Trump administration is making now, allowing the plans to last up to 364 days and letting insurers renew them for as many as three years — a renewal that the ACA had forbidden.
Until now, the health-care law had a built-in deterrent for those considering short-term plans. They do not satisfy the ACA’s requirement that most Americans carry health insurance. As a result, people who buy such policies have risked a tax penalty that the law places on those who violate the coverage mandate.
But that won’t matter starting in January, when the penalty will disappear as a result of the tax overhaul the Republican-led Congress adopted late last year.
The expanded plans can go on sale in two months, or as long as it takes for state regulators to approve them. Several states do not permit them.
Since the administration first proposed an expansion of short-term plans, health policy researchers have been studying the potential effects — and what the existing plans are like.
In an April analysis, the Kaiser Family Foundation found that the short-term plans sold by two online private insurance marketplaces, eHealth and Agile Health, often charge one-fifth the premiums for the lowest-rung ACA health plans. But they may have higher out-of-pocket costs, as well as yearly or lifetime coverage limits that are forbidden by the ACA. None covered maternity care, slightly more than one-quarter had prescription drug coverage, and slightly more than half provided mental health benefits — although such benefits typically have limits.
An Urban Institute study last winter estimated that 4.2 million people would enroll in the expanded version of short-term plans the administration had in mind. And because healthy people could be expected to gravitate toward these alternatives, or drop coverage altogether once the mandate’s penalties end, ACA marketplaces would be saddled with a greater share of people with health conditions, driving up premiums for ACA health plans by nearly one-fifth in 2019.
A federal analysis accompanying the new rules estimates that 600,000 extra people — 100,000 of whom are currently uninsured — will buy such plans next year, increasing to 1.6 million within four years. It predicts that 200,000 will withdraw from ACA marketplaces in 2019 in favor of the alternative coverage.
Federal health officials said that insurers will have to give customers notices encouraging them to read carefully what the plans do and do not cover. “These policies are not qualified health plans,” Parker said, referring to insurance that meets ACA standards. “We want potential purchasers to understand that.”
The 121-page rules document acknowledges that opponents may lodge lawsuits challenging the government’s interpretation that the plans can be renewed, but it contends that the change is “legally sound.”