The department’s plan would allow insurance companies to sell virtually unregulated health policies. This would signal a return to the bad old days when insurers could sharply limit benefits, impose caps on coverage and discriminate against people with preexisting conditions. Obamacare was designed to eliminate the sale of junk health insurance plans that disappear when people need them. But its major reforms did not extend to short-term plans, which are meant for people between jobs and can currently run for only up to three months. So the Trump administration is telling insurers that “short- term” plans can now run up to 364 days.
It’s true that the marketplaces Obamacare established would persist, and participating insurers could still sell only comprehensive plans on them. But insurers would lure young and healthy people toward cheap, unregulated short-term plans, leaving sicker, older enrollees in marketplace-compliant plans. The young and healthy could wait to get sick, then jump back into marketplace-compliant plans when they needed expensive care. With fewer healthy people paying in, insurers would have to hike premiums for marketplace-compliant plans — if they decided to continue offering them at all.
True, many people would be protected from premium spikes because government subsidies would rise in step. But that would mean more government spending just as deficits are widening. Moreover, many middle-class people are ineligible for subsidies. Those with medical histories that make them unattractive to insurers designing exclusionary short-term plans — or those who simply want the peace of mind that comes with keeping a quality insurance plan — would be required to pay a lot more.
The Trump administration predicts that skimpy short-term plans would mainly attract healthy, currently uninsured people into the system. It plays down the possibility that many people would exit marketplace-compliant plans in search of cheap plans, destabilizing premiums for comprehensive policies. But that prediction flies in the face of warnings from independent experts — and recent experience. Regulators previously allowed limited exceptions to Obamacare rules, and these exceptions are among the reasons the marketplaces have not been as stable as Obamacare’s authors had hoped. Allowing healthy people to buy junk insurance plans is not worth risking sick and vulnerable people’s access to real coverage.
Unless the Trump administration reverses course, it will be up to the states to prevent the damage. Maryland lawmakers are considering legislation that would reimpose an individual-mandate penalty on those who go without comprehensive insurance in the state, in lieu of the federal penalty that Republicans just neutered. Not only would this compel more Marylanders to do the responsible thing and get covered, but also it would require that the coverage be substantial. Any state seeking to avoid more turmoil should follow suit.
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