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Extending short-term health plan coverage: The latest attempt to hobble the ACA

Aug 06, 2018

The Trump administration issued a final rule concerning short-term health plans. Consumers can now extend coverage for up to a year, with the option to renew for up to three years.The current rule, issued under the Obama administration, limits short-term coverage to three months.

“President Trump is bringing more affordable insurance options back to the market, including through allowing the renewal of short-term plans,” said Health and Human Services Secretary Alex Azar. “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.”

Our Take: On the surface, the final rule looks like a good idea—especially if you never bought into Obamacare. On average, individual unsubsidized Affordable Care Act (ACA) plans cost about $400/month. By comparison, average short-term health plans cost about $125/month. That’s good news if you’re young, male and healthy, and you don’t have any pre-existing conditions.

We have chronicled over the years the steps that lawmakers have taken to chip away at the ACA. The first was the failure to fund risk corridor payments to insurers—which spooked payers and led them to withdraw from markets across the nation—leading to markets lacking competition, which in some markets led to skyrocketing premium prices.

Then, there was the failure to enforce the individual mandate, and the Justice Department’s subsequent decision not to defend lawsuits against the ACA.

Then came the administration’s push for association health plans, and now the ruling on short-term plans, both of which bypass fundamental provisions in the ACA, such as coverage for pre-existing conditions, and offering mandatory benefits, like coverage for behavioral health services and substance abuse.

(Side-note: at the end of July, attorneys general from 11 states and Washington, D.C. filed suit against the Trump administration, seeking to roll back a regulation that allowed for the expansion of association health plans.)

Here’s what industry advocates had to say about short-term health plans:

“We remain concerned that consumers who rely on short-term plans for an extended time period will face high medical bills when they need care that isn’t covered or exceed their coverage limits.” – Matt Eyles, president and CEO, America’s Health Insurance Plans

“Fake insurance is no substitute for real coverage. ACAP has long opposed this … proposal as an arbitrary and capricious effort to do a regulatory end-run around the patient protections in the Affordable Care Act. Countless Americans will be hurt by this new regulation, from patients to providers.” – Margaret Murray, CEO, Association for Community Affiliated Plans

Whatever you may think about Obamacare, these debates come down to one’s personal belief in the role of government in the funding of health care. How you interpret the charts below in “By the numbers” will offer an indication of where you come down on the issue.

But, as you view the chart, keep one background statistic in mind: We spend about 18 percent of GDP on health care, or about $3.3 trillion in 2016. Every year, we spend more on health care and the percentage of GDP continues to climb. Everyone should agree that this is a problem.

The ACA—shorthand for the Patient Protection and Affordable Care Act—was designed to protect consumers from insurance industry practices that had potential for harm, like being denied coverage for pre-existing conditions. It was also designed to introduce free market principles to local insurance markets, which in turn would expand coverage to Americans who didn’t have health insurance, either out of personal choice or because they couldn’t afford it. Other provisions in the ACA, such as accountable care organizations and bundled payments, were designed to slow the growth spending without compromising care.

By any objective measure, the early years of the ACA were a success. Not so much anymore.

Here’s the thing. The fundamental tenets of the ACA are like legs on a stool. Taken together, the stool stands strong. But lawmakers have been chipping away at the legs—risk sharing among payers, the individual mandate, broad coverage of health care services—and that is undermining the sustainability of the ACA.

The final rule on short-term health plans will offer relief to consumers who are paying high prices for premiums that, ironically, were largely caused by government policy to begin with. Let’s just hope they don’t get sick.

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