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- The Trump administration is rolling out a new proposal to expand the use of short-term health insurance plans.
- The plans would be a cheaper insurance option, but also offer limited coverage and could lead to denied coverage based on a preexisting condition.
- Health policy experts say the Trump administration’s move will weaken the Affordable Care Act.
- The short-term plan expansion is another step in Trump’s plan to reshape the healthcare system without repealing Obamacare.
President Donald Trump’s plan to reshape Obamacare without repealing the law continued Wednesday, as his administration rolled out its final plan to expand the use of skinny, short-term health insurance coverage.
The Centers for Medicare and Medicaid Services, or CMS, released a final rule that will expand short-term health insurance plans, a move that the administration said will help more people access cheap insurance options.
“We continue to see a crisis of affordability in the individual insurance market, especially for those who don’t qualify for large subsidies,” CMS Administrator Seema Verma said in a statement. “This final rule opens the door to new, more affordable coverage options for millions of middle-class Americans who have been priced out of ACA plans.”
But many health policy experts say the plans will offer severely limited coverage and could drive up costs for people who remain in the Affordable Care Act market.
What are short-term plans?
Prior to the Trump administration’s new rule, short-term plans were available for only three months with strict limitations on renewals.
Under the ACA, these plans were designed as a bridge to help people maintain coverage after a job loss or other change in insurance until the next enrollment period for longer-term plans under Obamacare.
The CMS rule released Wednesday will allow people to stay on a short-term health insurance plan for just under 12 months and make it easy to renew the plan for a total of three years.
Short-term plans are cheaper than ACA plans. CMS said the average short-term plan cost $124 a month in 2016 versus roughly $400 a month for an Obamacare plan. But that lower cost comes with another price.
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The plans do not have to meet Obamacare’s baseline coverage minimums, so things like prescription drugs or maternity care may not be covered under these plans.
According to the Kaiser Family Foundation, a nonpartisan health policy think tank:
- 0% of the short-term insurance plans currently on the market offer maternity care coverage.
- Just 29% cover prescription drug costs.
- 57% cover mental health needs.
Only 106,000 people were on short-term health plans at the end of 2016, according to the administration. But an analysis by the Congressional Budget Office estimated that number could grow to as much as 1.6 million in the next four years under the new rule.
What does this mean for Obamacare?
Larry Levitt, a senior vice president at Kaiser, said the expansion of short-term health plans would help provide some relief for some healthy people – but at the expense of others in the Obamacare markets.
“Plans with ACA consumer protections will still exist,” Levitt tweeted Wednesday. “But, the premiums for those plans will rise as short-term plans cherry pick healthy people. ACA enrollees eligible for subsidies will be protected, but middle-class people with pre-existing conditions will feel the full brunt.”
As more healthy people hop on cheaper short-term plans, the overall make-up of the ACA markets will be sicker and more expensive to cover for insurers. In turn, experts say, insurers will raise premiums to compensate for the increased average cost.
While most people in the ACA market will be shielded from the increases through federal premium subsides, those middle-class families in the market that do not receive subsides will bear the brunt of the higher costs.
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Short-term plans have also been a source of headaches for enrollees. As Bloomberg has reported, many short-term plan enrollees have been hit with unexpected costs and denied coverage when seeking benefits. These issues have led to a large number of customer complaints – and the plans being banned completely in some states.
Short-term plans represent the latest step in the Trump administration’s aim to reshape the healthcare system despite the failure of the GOP’s attempts to completely repeal Obamacare:
- Republicans were able to repeal the individual mandate, a key piece of Obamacare that required people to sign up for health insurance or face a penalty, as part of the GOP tax law.
- CMS and the Department of Health and Human Services approved waivers to allow states to impose work restrictions for people on Medicaid (this remains subject to legal challenges) and slashed funding that would advertise Obamacare plans.