BEYOND THE NUMBERS
The House will vote this week on a bill curbing so-called “short-term” health plans, which are exempt from the Affordable Care Act’s (ACA) consumer protections. Some argue that the bill would hurt consumers, citing a Congressional Budget Office (CBO) estimate that it would cause some people to become uninsured. But in reality, CBO’s analysis underscores the dangers of short-term plans. It confirms that short-term plans have large coverage gaps that expose consumers to catastrophic costs and that a Trump Administration rule expanding the availability of these plans will raise costs for people with pre-existing conditions. By blocking the rule and making other changes, the House bill would increase the number of people with comprehensive health coverage.
The Administration rule, which it finalized in August, allows short-term plans to last up to one year (versus three months previously) and be renewed. Short-term plans are exempt from the ACA’s ban on insurers denying coverage or charging higher premiums based on health status, its requirement that plans cover essential health benefits such as maternity care and prescription drugs, and its ban on annual and lifetime limits on coverage, among other consumer protections.
A CBO report on the rule finds:
Short-term plans’ benefit exclusions and other coverage restrictions will resemble individual market plans that insurers offered before the ACA. Most short-term plans “will resemble a typical nongroup insurance plan offered before 2014,” CBO writes. That means they will “often exclude coverage for pre-existing conditions” and exclude “many” essential health benefits. For example, 75 percent of individual market plans offered in 2013 excluded maternity care, 45 percent excluded substance use treatment, and 38 percent excluded mental health care, the Kaiser Family Foundation estimates.
CBO counts most people with short-term plans as insured, just as it did with pre-ACA individual market plans; that’s why it concludes that reversing the short-term plans rule would cause some people to lose coverage. But people buying short-term plans will often face catastrophic costs if they get sick. For example, a woman who enrolled in a short-term plan and was then diagnosed with breast cancer could face between $41,000 and $111,000 in out-of-pocket costs for her treatment, the American Cancer Society Action Network estimates based on a study of short-term plans in six states.
The Administration rule will prompt more than 600,000 people to drop comprehensive coverage and enroll in a short-term plan. The rule will significantly increase enrollment in short-term plans, CBO finds, and about half of those who enroll in plans that CBO counts as health insurance would otherwise have had comprehensive ACA coverage — without benefit gaps, exclusions for pre-existing conditions, or annual and lifetime limits on benefits. (Some short-term plans offer such limited coverage that they “do not meet CBO’s definition of private health insurance.”)
In another recent analysis, CBO suggests that the number of people dropping comprehensive coverage to enroll in low-quality short-term plans may grow over time. Moreover, these analyses may not fully account for insurers’ widespread use of deceptive marketing practices to promote short-term plans, as a recent Georgetown Center for Health Insurance Reforms study documented. If these practices are prevalent and successful, even more people will likely enroll (and in even worse health plans) than CBO projects.
- The lower premiums that short-term plans can offer healthy people come at the expense of higher costs for sicker people. Because short-term plans will pull healthy people out of the ACA individual market, ACA premiums will rise because of the rule, CBO finds. Lower-income consumers will be protected from these higher premiums because federal premium tax credits will rise to compensate. But consumers with incomes too high to qualify for tax credits and who need comprehensive coverage — including middle-income people with pre-existing conditions — will pay more.
Reversing the short-term plans rule is part of House leaders’ broader agenda to improve and expand coverage. The bill that the House will vote on this week would also reverse the Administration’s funding cuts to ACA marketplace outreach that informs consumers about their coverage options and to in-person enrollment assistance through navigator programs. The bill’s outreach funding would lead about 500,000 more people to enroll in coverage and would modestly reduce individual market premiums, CBO estimates, because the people buying coverage as a result of expanded outreach “would likely be healthier, on average, than the average . . . enrollee who would enroll under current law.” CBO similarly concludes that more funding for in-person enrollment assistance could “improve the average health of enrollees in marketplace plans (and thus lower average premiums for those plans).”
House leaders have also introduced broader health care legislation that would improve financial assistance for ACA marketplace consumers. In particular, it would increase ACA premium tax credits and raise the credits’ income eligibility limit, allowing middle-income individual market consumers to buy coverage for 8.5 percent of their income or less. These changes would reduce premiums and make comprehensive coverage more affordable for both healthy and sick middle-income consumers. The short-term plans rule, by contrast, offers healthy middle-income people plans with low premiums but large gaps in coverage and raises premiums for middle-income people with pre-existing conditions.