The Trump administration has finalized rules making it easier to enroll in short-term insurance plans, another blow to Obamacare that increases access to cheaper, skinnier coverage that doesn’t adhere to the health care law’s standards.
The Trump administration has prioritized expanding coverage options, arguing that the Affordable Care Act severely eroded choice for individuals buying their own insurance. Critics deride short-term plans as “junk” insurance that won’t protect people with pre-existing conditions, and they argue the plans will undermine Obamacare’s fragile exchanges by siphoning off healthy customers.
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In June, the Trump administration finalized rules making it easier for small businesses and independent contractors to band together to offerthat aren’t subject to the ACA’s coverage mandates. The moves stem from an executive order signed by President Donald Trump in October — after congressional repeal efforts fell through — directing administration officials to overhaul regulations and allow more alternative offerings.
“You’ll get such low prices for such great care,” Trump said at the signing of the executive order. “It should have been done a long time ago.”
The, which were released Wednesday morning, are a reversal of the Obama administration’s efforts to limit short-term plans. The previous administration reduced the plans’ maximum length from one year to three months in the hope of steering more people into comprehensive Obamacare coverage.
The Trump administration, in a vast expansion of the short-term plans, is restoring the previous 12-month enrollment limit and will allow people to renew the coverage for up to 36 months. Trump’s health department projects 600,000 will enroll in short-term plans next year, with that market eventually growing to 1.6 million people.
Democrats, who are eager to campaign against the Trump administration’s efforts to undercut Obamacare’s consumer protections, say short-term plans only offer an illusion of coverage, and enrollees often don’t realize how limited their benefits are until it’s too late.
“This move is the lynchpin in Trump’s plan to turn back the clock to the days when Americans with pre-existing conditions were left out in the cold and insurance companies could deny care at will or charge whatever they pleased,” said Senate Finance Committee ranking memberin a statement.
The short-term plans are cheaper in part because insurers can refuse to cover people with pre-existing conditions and limit coverage of expensive services like mental health treatment. Short-term plans also typically cap coverage, so customers can still end up getting socked with expensive medical bills.
“There’s a real worry that consumers will believe they’re buying comprehensive insurance that protects them financially from the unexpected, but then are left high and dry with medical bills,” said Sabrina Corlette, an insurance expert at Georgetown University and former Democratic Senate staffer.
The new rules take effect in 60 days, before the next Obamacare enrollment season opens Nov. 1. CMS, which oversees the ACA insurance marketplaces, expects Obamacare enrollment to shrink by 500,000 next year — and by 1.3 million over a decade — because of the increased availability of short-term plans.
The vast majority of Obamacare customers are low-income and receive generous subsidies to purchase coverage. But Trump administration officials say the expanded coverage options are needed, particularly for middle-income people who earn too much to qualify for Obamacare subsidies and can no longer afford coverage.
The average monthly premium in the fourth quarter of 2016 for a short-term plan was $124, according to CMS, compared to $393 for an unsubsidized Obamacare plan. Enrollment of unsubsidized customers in the Obamacare exchanges dropped by 20 percent in 2017, or about 1.3 million people, while premiums jumped an average of 21 percent. However, overall exchange enrollment is slightly up this year, largely because of federal subsidies.
In 2017, insurers selling short-term plans spent an average of 65 percent of premium revenues on medical costs, according to the National Association of Insurance Commissioners. That’s far below the 80 percent threshold Obamacare plans must spend on medical care and quality improvement.
Health care groups largely opposed the Trump administration’s expansion of short-term plans, fearing the coverage will expose patients to unexpected bills and fracture the wobbly Obamacare markets.
“The broader availability and longer duration of slimmed-down policies that do not provide comprehensive coverage has the potential to harm consumers, both by making comprehensive coverage more expensive and by leaving some consumers unaware of the risks of these policies,” said Justine Handelman, senior vice president at the Blue Cross and Blue Shield Association, in a statement.
Trump officials said the final rule strengthens short-term plans’ disclosure requirements and that state regulators can add consumer protections.
“We do really want people to be able to fully read and understand what they’re buying,” said Randy Pate, director of the HHS Center for Consumer Information and Insurance Oversight, on a call with reporters. “We fully recognize these products are not necessarily for everyone.”