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- The Department of Health and Human Services debuted a new rule expanding the use of short-term health insurance plans.
- The rule would allow people to use short-term plans that do no comply with Obamacare regulations for up to 12 months.
- People are currently only allowed to use such plans for three months.
- Health policy experts say the plan will increase costs for the government and many sick people in the middle class who get their insurance through the Obamacare exchanges.
The Trump administration on Tuesday debuted a new rule that would allow Americans more access to short-term health insurance plans, in a move that some experts warn could have serious consequences for the Affordable Care Act, or Obamacare.
The new rule would permit people with individual health insurance to purchase short-term coverage for up to one year.
Currently, these short-term plans – which are designed to fill gaps in coverages in case someone loses their job or experiences a major life change – can’t be used for more than three months.
The Trump administration says the expanded use of short-term health plans will allow people greater flexibility and lower prices for healthy people.
“The status quo is failing too many Americans who face skyrocketing costs and fewer and fewer choices,” Alex Azar, the secretary of the Department of Health and Human Services, said in a statement announcing the move. “The Trump Administration is taking action so individuals and families have access to quality, affordable healthcare that works for them.”
These short-term plans offer skinnier sets of benefits and do not have to abide by all regulations under the Obama-era health law. For instance, the plans can charge people more based on their health history, cap the amount of benefits a person can receive, and do not have to cover what are known as essential health benefits – 10 baseline types of care.
Given the “skinny” nature of the plans, they typically cost less up front and can save healthier people money.
But many health policy experts warn that shifting more healthy people from Obamacare markets to these short-term plans could drive up costs for sicker people who remain in the individual ACA marketplaces.
According to the administration’s memo on the new rule, between 100,000 and 200,000 people are expected to take advantage of the new plans and shift out of the Obamacare marketplaces.
Larry Levitt, a senior vice president at the Kaiser Family Foundation, a health policy think tank, said lower-income people in the ACA marketplace will be protected since they receive subsidies to offset the cost of insurance. But he predicted middle-class people would get hit hard.
“Short-term insurance plans will cherry pick healthy people, leaving ACA-compliant plans to cover a sicker pool with higher premiums,” Levitt tweeted. “With the expansion in short-term insurance plans, low-income people will be protected from higher premiums by subsidies. Middle-class people with pre-existing conditions will feel the full brunt of higher premiums.”
He said the expansion would force the federal government to offset cost increases for some people by hiking tax credits they get on their premiums. The administration’s memo said the need for increased premium assistance would cost the federal government between $96 million and $168 million per year.
“Keep in mind that HHS projects this change will cost the government $96-$168 million more every year,” Rachel Sachs, an associate professor of law at Washington University in St. Louis, tweeted after the rule’s release. “So the government will spend millions more to provide fewer people with comprehensive insurance.”
Loren Adler, associate director at the University of Southern California and Brookings Institutions’ Schaeffer Initiative for Health Policy, similarly pointed to the large cost.
“This is a VERY expensive rule for taxpayers,” Adler tweeted.
The new rule is another in a series of major changes to the nation’s healthcare system from the Trump administration over the past year, including allowing new work requirement for Medicaid recipients and the repeal of the ACA’s individual mandate.