By Leandra Bernstein
WASHINGTON (Sinclair Broadcast Group) — The Trump administration proposed a new rule on Tuesday that would allow health insurance providers to provide short-term health coverage plans that do not meet the coverage requirements under the Affordable Care Act, or Obamacare.
The Trump administration says the plans will give consumers more options and cheaper options than what is currently available through the Obamacare exchanges or the individual market. Critics argue that the rule change could further destabilize the health insurance market and fuel the rising cost of premiums.
"Regardless of someone's politics, just as an empirical matter, we can all agree that the Affordable Care Act is not delivering for enough people right now," said Alex Azar, Secretary of Health and Human Services.
In an interview with Sinclair Broadcast Group, Azar explained that the rule is part of an effort to counteract the growing insurance costs that have deterred many people from even entering the market.
"This is simply for those people who have been priced out of the Affordable Care Act individual markets because of these skyrocketing premiums, for those people who aren't getting subsidies from taxpayers to buy that insurance," he said. "This is at least the possibility of a low-cost individualized option that may work for some of them."
According to estimates from the Centers for Medicaid Services, short-term, limited-duration insurance costs one-third as much as the ACA plans. The non-partisan Kaiser Family Foundation found in some states, premiums for the non-ACA compliant plans can be ten times less expensive than the cheapest Obamacare plan. Under Trump's proposed rule, a short-duration plan can last a maximum of 12 months and cannot be renewed.
There are some key tradeoffs. With the cheaper plans, insurers do not have to cover essential health benefits like prescriptions, emergency care, preventive services, or maternity care. Insurers can also deny coverage or raise the cost of a plan for individuals with preexisting conditions.
Secretary Azar said consumers should go into the healthcare market with "eyes wide open," acknowledging that the short-term plans will not work for everyone.
There are three groups the Trump administration believes will benefit from the rule change. First, people who are in between jobs and experience a lapse in insurance coverage. Second, are the people living in one of more than 1,200 counties with one Obamacare insurer or none at all. The third group, Azar said are "the forgotten men and women" who earn too much for subsidized health insurance and too little to afford an ACA plan.
"This is about giving people a choice," Azar stressed. "I don't view people making choices as a negative thing."
RISING PREMIUMS, DESTABILIZING THE MARKETPLACE?
The short-term plans will definitely offer individuals a third option between not being insured and purchasing expensive ACA-compliant insurance, but health policy analysts and industry groups worry that the change could further rattle the insurance marketplace and fuel higher premiums for some subscribers.
America's Health Insurance Plans, a top lobbying group for insurance providers, is concerned that expanding the use and availability of short-duration health plans "could further fragment the individual market, which would lead to higher premiums for many consumers, particularly those with pre-existing conditions."
The group warned that the low-cost, low-coverage plans would "siphon off younger, healthier people" leaving high-risk, high-cost patients in the exchanges. That, in turn, would increase the cost of coverage. It is not clear how many people will decide to leave if the Trump administration promotes the short-term health plans.
Secretary Azar argued that those low-risk individuals have already left. "The young and healthy have already been driven out by the skyrocketing prices of premiums and they're sitting out there as part of the 28 million people who are uninsured," Azar said. "These are options for them ... it's an affordable individualized option."
The Centers for Medicare and Medicaid estimate that between 100,000 and 200,000 people who are currently in the individual marketplace will choose to move over to the short-term duration plans.
Some analysts have said that number could be much greater. Under the Republican tax plan, the individual mandate will be repealed starting in 2019, and with it the tax penalty for every month without health insurance coverage will be lifted. For healthy individuals, the option of paying a third-less for a month-to-month plan without facing a tax penalty could cause more people to flee the exchange.
"That is highly speculative," said Doug Badger, a health policy researcher at the Galen Center, noting that most of the low-risk subscribers have already opted out of the market.
"The most powerful driver of whether somebody makes the decision to buy or not is the cost," he added. "The premiums now have reached a point where if you're in reasonably good health, ACA-compliant coverage, whether on or off the exchange, is just a bad deal."
The Centers for Medicare and Medicaid Services documented the impact of high-cost plans, reporting that more than 2 million people dropped out of the health insurance exchanges in the first three months of 2017. The most common factors that led them to exit were high costs and lack of affordability.
Critics have raised concerns about the possible impact of Trump's plan, however, many have failed to acknowledge that the plan is not new.
For the first five years of the Affordable Care Act, insurers could offer non-ACA compliant plans for up to 12 months and the plans were renewable. Shortly before leaving office, President Barack Obama changed the rule, limiting the plans to 90 days and banning guaranteed renewability. A number of insurers still offered "four packs" of three-month coverage to carry subscribers through the year.
"What yesterday's rule proposes to do is to go back to the status quo ante," Badger said. The only difference is the Trump rule leaves open the question of whether the plans can be renewable.
WINNERS AND LOSERS
In discussing the impact of the rule change, Larry Levitt, senior vice president for health reform at the Kaiser Family Foundation, advised, "Always remember, health policy is about trade-offs."
The Affordable Care Act subsidized low-income subscribers and people with pre-existing conditions but passed on higher costs to middle-class healthy people who don't qualify for subsidies. Levitt noted expanding the short-term insurance plans "rolls that back some."
With the Affordable Care Act law still in place, government subsidies will continue to flow to low-income, high-risk subscribers and healthy people who don't need comprehensive coverage can save money on the low-cost, low-coverage plans.
"Middle-class people with pre-existing conditions will feel the full brunt of higher premiums," Levitt said. He continued, "The expansion of short-term health insurance plans is part of a strategy to create a parallel insurance market that does not comply with the ACA's rules."
The expansion of short-term health insurance plans is part of a strategy to create a parallel insurance market that does not comply with the ACA's rules.— Larry Levitt (@larry_levitt) February 20, 2018
The promotion and expansion of a "parallel insurance market" will have some impact on premiums across the board. The Centers for Medicare and Medicaid Services estimates that government subsidies will likely increase by $200 million in connection to the limited duration insurance plans.
In the greater scheme of skyrocketing premiums, Badger noted that the increase is "a relatively small amount." Badger recently led a research project to investigate the primary causes of premium increases under the ACA, he said the impact short-term insurance plans "don't even get on anybody's radar screens in terms of raising premiums."
In the coming years, health insurance premiums are on track to increase 10 percent annually, according to a Congressional Budget Office estimate following the repeal of the individual mandate.
As to whether Trump's expansion of short-term insurance policies will negatively impact the overall stability of the ACA marketplace, Kaiser Family Foundation reported that it "remains to be seen."
The Tuesday announcement of the policy change from HHS began a 60-day period for public comment. After April 23, the administration will make its final ruling.