The Trump administration is opening up a new avenue for Americans to buy health insurance that does not comply with the Affordable Care Act’s regulations, the latest step in Donald Trump’s administrative crusade against the health care law.
The US Department of Health and Human Services’ new proposed regulations would allow Americans to buy short-term insurance for up to 364 days. That coverage is allowed to skirt several of the health care law’s core provisions: Plans can deny people insurance based on their medical history, charge them higher premiums because of their preexisting medical conditions, and craft skimpy benefits packages that will appeal mostly to young and healthy people.
By broadening the definition of short-term insurance, the Trump administration is opening more loopholes for more people to buy insurance outside the health care law’s marketplaces. In the eyes of the administration, this is fulfilling a campaign promise that President Trump made to give people relief from Obamacare.
“It’s one step in providing Americans with health insurance that is both more affordable and more suited to individual and family circumstances,” HHS Secretary Alex Azar told reporters on Tuesday.
But experts anticipate those changes would damage the market for customers who are left behind. Because younger and healthier people are more likely to leave the markets and buy short-term insurance, leaving an older and sicker pool behind, the ACA markets are likely to face higher premiums. And some insurers might to decide to leave the law’s markets altogether if the customers become too unhealthy and therefore too expensive.
“This appears to be a backdoor way of undermining the Affordable Care Act,” Kevin Lucia, who studies the markets at Georgetown University, told me last fall when Trump issued his executive order to expand short-term insurance and association health plans, which set the stage for the new regulations.
Short-term limited-duration insurance, explained
The Trump administration is expanding what’s called short-term limited-duration insurance. These short-term policies typically have higher out-of-pocket costs and cover fewer services than traditional insurance. They were designed for people who, for example, expect to be out of work and therefore without insurance for a limited period of time.
That kind of coverage is totally free from the health care law’s insurance regulations: the mandate to cover essential health benefits, the prohibition on charging sick people more than healthy people or denying people coverage based on their medical history, and so on.
Short-term insurance had previously been allowed to last as long as 364 days. The Obama administration, in an effort to curtail the use of such coverage to circumvent the health care law, shortened it to three months in 2016. The Trump administration would reverse that rule, once again allowing people to buy this non-Obamacare coverage for almost an entire year.
Plans would be required, under the Trump administration’s proposed regulations, to notify customers that the short-term coverage does not comply with some of the ACA’s central insurance protections. But administration officials dismissed the idea that this was a flaw, pointing instead to the issue of affordability.
HHS estimated that a short-term plan costs about $125 per month in late 2016 versus nearly $400 for an Obamacare plan before any federal tax credits were applied — though most customers on the ACA markets qualify for subsidies.
“This provides a much more affordable option for people in need,” Seema Verma, who heads the Centers for Medicare and Medicaid Services, told reporters.
How short-term insurance could hurt Obamacare’s markets
The effect could be much the same as the changes to association health plans, another lane the administration is opening up to allow people to buy insurance outside of the ACA: Healthier people would be the consumers most likely to use this escape hatch to find cheaper, if less comprehensive, coverage outside of Obamacare.
CMS administrator Seema Verma said the administration was seeking input on whether to allow the policies to be renewed as part of the comment period that will follow the release of the proposed regulations. Experts have said that allowing these policies to be renewed would heighten the damage to to the ACA markets.
Republicans in Congress have already repealed the individual mandate, which had previously been a deterrent to short-term coverage — it wasn’t considered compliant with the mandate, so people who bought short-term insurance also had to pay the mandate penalty.
But that deterrent no longer exists, which could encourage more people to flee the Obamacare markets for short-term coverage.
“If you allow them to sell 364-day policies, or policies that are renewable, that’s just going to suck a lot of the healthy people out of the individual market,” Tim Jost, a health law professor at Washington and Lee University, told me last fall when Trump issued his executive order.
That could leave behind an older, sicker, and costlier market. In response, health insurers would be expected to raise their premiums or exit the market altogether. Many Obamacare customers are protected from premium increases through the ACA’s tax subsidies, but costs to the federal government could increase.
People who make too much money to qualify for subsidies could be stuck between paying the full price for the more expensive ACA coverage or buying a short-term plan. This might be fine if they are young and healthy, but might not cover the services they need if they are older or have some medical issues.
The Trump administration is dismissive of claims that the new regulations would hurt Obamacare’s markets. They estimate only 100,000 to 200,000 people would shift from the ACA marketplaces to short-term insurance and emphasize that the 30 million or so people in the United States who are still uninsured might find short-term coverage to be an affordable option.
“We don’t think there’s any validity to that,” Verma said of these criticisms, adding that the administration thought there would be “virtually no impact on the individual market premiums.”
The ACA has proven remarkably resilient in the face of the Trump administration’s efforts to undermine it. Every county had at least one insurer selling Obamacare coverage last year, even as Trump sowed uncertainty and cut off key payments to insurers. Enrollment in marketplace plans held nearly steady at 12 million people, even as HHS dramatically cut its spending on advertising and outreach.
But these new regulations are a reminder that the Trump administration still has more tools at its disposal to undercut the ACA — risking a death by a thousand cuts, as some of the law’s supported have warned.