The Department of Health and Human Services (HHS) issued a rule change on Aug. 1 that would expand the scope of short-term, limited-duration health insurance plans to a year and provide another option to those seeking a truly free-market health insurance plan.
These short-term plans are meant to cover people who face gaps in their insurance coverage, such as when they transition to a new job, but under the Obama administration, those plans couldn’t last more than three months and couldn’t be renewed.
Part of the proposal would allow people to not only renew their stop-gap insurance for up to three years, but if they choose to buy another type of insurance called a “renewal guarantee,” they can get it at the same rate when they renew as they did when they entered, even if they develop a serious condition.
To encourage people to sign up for the government-run exchange plans, the Obama administration in effect killed this option, a move that was legally tenuous, according to Michael Cannon, director of health policy studies at the libertarian Cato Institute.
“The statute actually does not give HHS the authority to regulate these insurance instruments, these insurance products that we call renewal guarantees, much less does it give HHS the authority to ban them,” Cannon said. “They were trying to ban something they don’t even have the authority to regulate.”
The Trump administration touts the expansion of these short-term plans as another option for Americans struggling to pay unsubsidized premiums for plans under the Affordable Care Act.
“Under the Affordable Care Act, Americans have seen insurance premiums rise and choices dwindle,” Health and Human Services Secretary Alex Azar said in a statement. “President Trump is bringing more affordable insurance options back to the market, including through allowing the renewal of short-term plans. These plans aren’t for everyone, but they can provide a much more affordable option for millions of the forgotten men and women left out by the current system.”
Short-term, limited-duration health insurance, known in health-speak as STLD, is unique in that it was never subject to the regulations that full health care plans were under the Affordable Care Act, widely known as Obamacare. STLD plans don’t have to cover someone with a pre-existing condition, are not required to cover certain things, such as maternity care or mental health treatment, and are not subject to cost-sharing limits like full health care plans are.
These skinny bundle-type plans may cover a much smaller range of issues, but they are cheaper, which likely will make them more appealing to people who are healthy and make above $48,000, roughly the limit to be eligible for subsidies under Obamacare.
The non-partisan Congressional Budget Office estimates that by 2023, 2 million more people who are currently uninsured will gain coverage through STLD plans. This could snowball as premiums rise for Obamacare plans, which rely on healthy people staying in them to offset the costs of covering the sick.
By one estimate, from the left-leaning Urban Institute, health care premiums under Obamacare might rise by 18.2 percent next year. That’s on top of increases over last year. Between 2017 and 2018, according to the institute, the lowest-cost silver insurance plans increased by an average of 32 percent. The more expensive gold plans went up by 19 percent over the same period.
This concurs with data from the Centers for Medicare & Medicaid Services (CMS), which found that premiums increased by 21 percent in 2017. It also found that enrollment in subsidized health insurance plans remained stable, while the number of people enrolled in the individual market without subsidies declined by 20 percent.
“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.”
The other change that could potentially drive healthy people away from ACA plans is the suspension of penalties under the individual mandate starting next year.
Except for some exemptions, the individual mandate requires individuals to be insured or face fines at the end of the year. While the individual mandate is still in effect with no sign Congress is going to repeal it, next year it will essentially be toothless. The penalty, starting in 2019, for not having health insurance will be $0.
The penalties are still in effect for this year, though, and STLD won’t protect someone from those penalties.
President Donald Trump has repeatedly called for the repeal of Obamacare, but after three tries, the Republican-controlled Congress has been unable to pass a bill replacing it.
In lieu of legislative change, Trump signed an executive order called “Promoting Healthcare Choice and Competition Across the United States” last October to allow people to buy health insurance plans across state lines, and allow employers, particularly smaller ones, to form associations to offer better health care options to their employees, among other things.
Part of that executive order was expanding STLDs.
The HHS has issued its final rule on the matter, but it won’t go into effect until for at least another two months.