The Trump administration announced a sizable change to the Affordable Care Act (ACA) Tuesday– winding back Obama-era rules on skimpier health insurance. The administration is proposing to expand access to short-term health plans, which is intended to fill temporary gaps in coverage and provide some consumers with cheaper options because the plan’s coverage is limited. This is just the latest move to undermine the ACA, and it’ll cost the federal government anywhere between $96 to $168 million more every year.
“We need to be opening up more affordable alternatives,” the Department of Health and Human Services (HHS) secretary Alex Azar told reporters Tuesday. The plans are only cheaper because they skirt federal consumer protections. Short-term plans are often medically underwritten — meaning, consumers can be denied or charged more for their health condition. The plans do not need to cover the law’s 10 essential benefits, like maternity care, and policyholders can impose lifetime or annual limits, which cap covered benefits. The Trump administration would allow people to purchase these plans for up to 12 months rather than the three months under the Obama administration.
Tuesday’s changes will pull healthier people out of the ACA marketplaces, and increase premiums for those who stay, according to the Trump administration. HHS officials anticipate anywhere between 100,000 to 200,000 people would leave ACA-compliant plans for short-term health plans, but many experts believe this is a conservative estimate.
These short-term policies were growing prior to the Obama administration’s efforts in 2016 to limit them. The number of people in short-term plans grew from 144,000 individuals in 2015 to 160,000 in 2016, according to a recent National Association of Insurance Commissioners report. This growing enrollment occurred when everyone was required to have ACA-compliant plans and when they weren’t as pricey, said Avalere Health’s Chris Sloan. Now, short-term plans will become even more attractive with recent changes to the ACA, Sloan added. Republicans in Congress repealed the individual mandate starting in 2019, so people will no longer need to pay a penalty if they decide to purchase short-term health plans. And ACA-compliant plans continue to become increasingly expensive for people who don’t receive federal assistance.
Tuesday’s changes create an insurance market parallel to the ACA — one for healthy people who make too much to qualify for tax credits, so they exit the ACA marketplaces. Reacting to an increasingly sicker ACA marketplace, insurance companies will then increase premiums. For those who make less than 400 percent of the poverty level, these spikes effectively don’t matter. The federal government will pick up the tab for these people, and this will cost taxpayers $96 to $168 million more every year — a figure based on a conservative estimate of the number of people who will flee.
Premium increases will hurt those who make too much to qualify for premium tax credits and have pre-existing medical conditions that prohibit them from purchasing short-term plans. For these people, Trump’s promise to provide Obamacare relief falls short.
ACA marketplaces will be indicative of where consumers live. States can safeguard their markets by regulating these short-term health plans; some states have already limited the length and renewals of short-term health plans.
Massachusetts has its own state-wide individual mandate in place and presumably short-term health plans don’t comply with the state law. (ThinkProgress reached out to the Massachusetts health department for clarification but did not immediately hear back.) Maryland is also trying to create its own state-wide individual mandate, and short-term health plans do not qualify as having health insurance. “We are working on friendly amendments to make sure that [short-term health plans are] incorporated into the final bill, as that will make it stronger in terms of stabilizing our insurance market and protecting consumers from getting weak plans that don’t meet their needs,” Suzanne Schlattman, of Maryland Health Care for All Coalition, an advocacy group working alongside lawmakers to advance Maryland’s mandate efforts.
CORRECTION: This post originally said changes were made on Monday when changes were made on Tuesday. We regret the error.