Trump extends short-term plans offered as a way out of Obamacare
Author: Washington Examiner - August 1, 2018 - Updated: August 23, 2018
The Trump administration will allow people to buy short-term health insurance for just under 12 months and extend them for up to three years, reversing an Obama administration-era rule that put a shorter limit on how long these plans can be used.
The administration casts the maneuver as a way to provide alternatives to expensive Obamacare plans for consumers, but Democrats oppose the plans as “junk insurance” that bring the country to a pre-Obamacare era offering inadequate medical coverage.
The move overturns a rule implemented in April 2016 that restricted the time people were allowed to be on these plans to three months. Prior to that, people were able to have them for nearly a year, or 364 days.
Under the Trump administration’s new rules, people can renew their short-term coverage twice, for a maximum of 36 months, Randy Pate, deputy administrator at the Centers for Medicare and Medicaid Services, said in a call Tuesday with reporters.
Not all health insurers will choose to go this route, or to guarantee that a person will be allowed to renew their plans automatically. Insurers may choose, for instance, to re-evaluate a customer’s health status before deciding to approve an application once a year is up.
The Trump administration said that insurers must spell out the rules clearly for customers, including whether plans have annual or lifetime limits, and warn that they do not satisfy the Obamacare penalty for going uninsured, which doesn’t zero out until 2019.
“We think it’s very important that individuals thoughtfully consider what they are buying,” Jim Parker, director of the Office of Health Reform at the Department of Health and Human Services, said in the media call.
Some states may choose to set stricter rules on short-term plans than the federal government does. Plans could be available to buy as early as 60 days from Aug. 1, but states are likely to take longer to set up their regulations.
Short-term plans are generally meant to be transitional coverage that people use in circumstances such as being between jobs or taking a semester off school. They may offer a less costly alternative to the estimated 7 million people in the U.S. who do not qualify for federal subsidies under Obamacare that lower the cost of premiums.
HHS estimates show that, in 2016, short-term policies for people who were unsubsidized cost an average of $124 a month, compared with an average of $394 a month for Obamacare plans. Prices have risen since then, and health officials said they estimated the short-term premiums would cost anywhere from 50 to 80 percent less than those offered in Obamacare for people who don’t get subsidies.
The plans are not required to offer the same consumer protections under Obamacare that cover a more extensive range of medical care, and insurers who sell them may turn down people with pre-existing illnesses. For example, insurers could choose to omit coverage for diabetes, cancer, or substance abuse treatment, or could charge people more who have some of these conditions.
Health officials said that they wanted consumers to understand that the plans may have fewer benefits, but that the Trump administration was seeking a wide array of alternatives that would allow people who did not have any affordable options for coverage to be able to have access to some sort of coverage rather than none.
“These policies are different from those offered on the exchange,” Parker said. “We make no representation that it’s equivalent coverage. These policies will not necessarily cover the same benefits or extend coverage to the same degree.”
People who don’t receive federal help paying for their premiums and who do not have a pre-existing illness requiring more extensive coverage are most likely to turn to the short-term option as an alternative to Obamacare plans. Because of how Obamacare is structured, people who make more than $48,240 for an individual or $98,400 for a family of four do not qualify for subsidies.
The Trump administration has said that without alternatives, millions in this group would otherwise go without health insurance coverage altogether.
About 10 million people fall below this income level and are receiving subsidies, some of whom qualify for plans that cost them as little as $0 a month because the federal government covers the cost. The Trump administration has said that people who fall into this category are unlikely to leave their Obamacare plans.
Critics of re-extending short-term plans worry that customers will not understand what they cover, and warn that healthier people will be siphoned out of the Obamacare exchanges, destabilizing the market by leaving a disproportionately sicker population in the exchange and once again driving up the prices of premiums.
“Short term junk plans don’t cover people with pre-existing conditions, don’t include coverage for basic medical needs like prescription drugs, and refuse to pay benefits when a legitimate medical emergency arises,” said Brad Woodhouse, executive director for the pro-Obamacare group Protect Our Care. “The Trump administration and its Republican allies in Congress want to give insurance companies the power to deny coverage based on the flimsiest excuse, and this rule does just that.”
HHS estimates show that roughly 200,000 people would leave the exchanges in favor of short-term plans.
“We don’t expect there to be significant migration away from the exchange by individuals who might otherwise purchase these policies,” Parker said.
Instead, the agency predicts that people will come from other parts of the market. The Congressional Budget Office has estimated that 2 million people will enroll in short-term plans, coming from both inside and outside the exchange, or from the ranks of the uninsured. Six million additional people are also expected to enroll in another option, known as association health plans, beginning Sept. 1. Those plans will allow individuals and small businesses to band together to receive coverage.
Taken together, the exodus of people from the exchanges to these plans will increase premiums on the exchanges by between 2 percent and 3 percent, according to CBO. The agency further predicted that 500,000 in this group of 8 million would be considered to have flimsy coverage that would put them at risk should they have a costly medical condition or accident.