Greater federalism is always welcome. But unless ObamaCare is repealed, the financial fallout of this version can’t be what anyone actually wants

States: Until Washington Repeals ObamaCare, Keep Mini Insurance Plans Limited

By —— Bio and Archives--June 13, 2018

American Politics, News, Opinion | Comments | Print Friendly | Subscribe | Email Us

States: Until Washington Repeals ObamaCare, Keep Mini Insurance Plans Limited
The old advertisement admonished consumers that, “You can pay me now…or pay me later.”  Proposed changes to short-term health insurance policies – for all of their philosophical merits – instead could lead to a scenario where everybody pays, all the time.

The plan would permit state insurance commissioners to expand the use of short-term, limited-duration health insurance for people experiencing a lapse in coverage. Currently, these options carry a three-month limit before the individual would need to sign up for a longer-term plan through Affordable Care Act (ACA) exchanges. The proposed new rule would grant state insurance commissioners leeway to extend these short-term plans to periods lasting up to 12 months, and could potentially allow people to renew them after that period has elapsed.


So what’s wrong with that?  Doesn’t the idea of extending the time for people to find more permanent coverage demonstrate compassion, wisdom, and patience?  Doesn’t granting more decision-making autonomy to the states dovetail with conservative values?  Well, yes, to all of the above.  But look a little deeper, and some flaws can be found lurking just beneath the veneer.

The Trump administration’s plan has the virtue of introducing market-based reforms and greater federalism into the health care system, thereby returning power to the states where it belongs.  But state commissioners need to exercise caution, resisting the temptation to seize every option granted to them under this plan.

The root cause is simple.  Congress failed to fully repeal the ACA.  Expanding short-term plans will not amount to a free-market alternative unless Congress actually repeals this law. 

As such, extending short-term insurance plans will in fact increase costs on vulnerable populations in the states.  Middle-income people will see premium increases too, since they will not be eligible for subsidies but will still purchase ACA-compliant plans.  We can also expect to see costs increase for the federal government, given that the ACA requires subsidies from the U.S. Treasury to account for rises in premiums on the insurance market. 

A report issued in April by the Kaiser Family Foundation confirms that as more healthy individuals select cheaper short-term policies, it increases instability in the insurance market and raises premiums for those with health issues. Lower-income people would be protected by premium subsidies, but costs would go up for ACA-covered middle-income people not eligible for subsidies, the report notes. 

“So far, the individual mandate penalty also has helped offset the cost differential between short-term plans and ACA-compliant plans, though this will disappear starting in 2019,” the Kaiser report continues.  “The combined effect of repealing the individual mandate penalty and the administration’s efforts to promote the sale of short-term plans could result in fewer people signing up for ACA-compliant plans and higher premiums in the ACA-compliant individual market, potentially adversely affecting the stability of the ACA-compliant individual market.”

Short-term health insurance plans carry a lower cost because they offer minimum coverage – just enough to prove that an individual or family has health insurance, not unlike the cut-rate auto insurance providers that advertise relentlessly.  Those policies may be great if the police pull you over and ask for proof of insurance, but they prove all but worthless if you actually get into an accident and need to recover repair or medical costs.  In much the same way, short-term health insurance does not cover essential health benefits such as maternity care, prescription drugs, and mental health.  Expanding access to these plans, therefore, could prove especially costly for policyholders.

“The question is, how do you get to that market,” noted Matt Eyles, CEO of America’s Health Insurance Plans (AHIP), in a recent podcast.  “If it’s because you’ve eliminated benefits that consumers otherwise find important, sure you can offer a much lower price plan. But you’re going to have a lot of surprises for people potentially down the road if they don’t really understand what it is they’re buying.”

According to an article in the January 13, 2018, edition of Modern Healthcare, compared with just 27 percent on the ACA exchange, 60 percent of individuals purchasing short-term plans in 2017 were between the ages of 18 and 34. These numbers may become even more skewed next year with the elimination of the individual mandate penalty.  Experts predict an 18 percent increase in premiums on the marketplace next year if short-term plans are expanded. For 60-year-olds purchasing silver coverage, for instance, the AARP Public Policy Institute projects as much as a $4,000 increase in premiums.

“There are many, and I’m one of them, who believe that [repealing the mandate] will harm the pool in the exchange market, because you’ll likely have individuals who are younger and healthier not participating in that market, and consequently that drives up the cost for the other folks within that market,” said Tom Price, former U.S. Health and Human Services Secretary under President Trump, at the World Health Care Conference held recently in Washington.

And, as noted earlier, subsidies from the federal Treasury will increase to meet the cost of rising premiums in the insurance market.  An independent study by Medicare’s chief actuary found that the plan would cost the government $1.2 billion next year and a total of $38.7 billion over 10 years due to subsidies for rising premiums.

Pay me now?  Yes, through higher premiums across multiple health care consumer categories, including those who misunderstand the limited extent of their coverage.  Pay me later, too?  Yes, again, as U.S. taxpayers continue to foot the bill to make up differences caused by higher insurance premiums. 

Greater federalism is always welcome.  But unless ObamaCare is repealed, the financial fallout of this version can’t be what anyone actually wants.  State insurance commissioners, do the right thing from an economic and practical viewpoint – keep access to short-term health insurance plans capped at three months.


Only YOU can save CFP from Social Media Suppression. Tweet, Post, Forward, Subscribe or Bookmark us

P. Richard Hayes -- Bio and Archives | Comments

P. Richard Hayes is a Pittsburgh-based communications consultant.

Commenting Policy

Please adhere to our commenting policy to avoid being banned. As a privately owned website, we reserve the right to remove any comment and ban any user at any time.

Comments that contain spam, advertising, vulgarity, threats of violence and death, racism, anti-Semitism, or personal or abusive attacks on other users may be removed and result in a ban.
-- Follow these instructions on registering: