Short-term plans could be a short-sighted solution

The combined effects of eliminating the individual mandate and expanding the use of short-term, limited-duration insurance policies would increase premiums and the number of individuals without minimum essential coverage, according to a new study from the Urban Institute. Referring to the study, Sen. Patty Murray (D-Wash) said, “this is some of the clearest evidence we have yet that Republicans’ politically-motivated health care sabotage is driving up health care costs for families-and that the Administration’s plan to allow insurance companies to sell ‘junk plans’ will raise costs and undermine protections for women and people with pre-existing conditions.”


Repealing the individual mandate, expanding short-term, limited-duration insurance, and cutting federal investments in advertising and enrollment will lead to an additional 6.4 million people uninsured in 2019 compared with rates under prior law. Additionally, the proposed expansion of short-term, limited-duration policies would increase the number of individuals without minimum essential coverage by 2.5 million in 2019. The Urban Institute projects that the combined effects of these policy changes would also increase 2019 ACA-compliant nongroup insurance premiums by 18.2 percent in the 43 states that allow short-term plans. The policy changes would also raise government spending 9.3 percent higher than under current law.

Short-term policies.

Short-term, limited-duration insurance policies are not governed the Patient Protection and Affordable Care Act’s (ACA) guaranteed issue, guaranteed renewal, modified community rating, essential health benefit requirements, prohibitions on preexisting condition exclusions, annual and lifetime limit prohibitions, and other protections. Such policies are also not part of the ACA’s risk-adjustment system. Previously, utilization of short-term, limited duration insurance policies was restricted due to the fact that (1) an individual with only this type of coverage would have violated the individual mandate and (2) HHS prohibited short-term policies sold in April 2016 or later from coverage exceeding three months and required insurance companies to inform consumers that the policies would violate the individual mandate.

Proposed rule.

On February 21, 2018, the Departments of Treasury, Labor, and HHS issued a Proposed rule (83 FR 7437) which, if finalized, would increase the maximum length of short-term, limited-duration insurance policies to one year. Combined with the repeal of the individual mandate, the Urban Institute notes, “these policies could compete as medically underwritten, largely unregulated alternatives to the products sold in the ACA’s private nongroup insurance markets.” This could create a scenario where healthier individuals are pulled away from the ACA-compliant market, leaving that market with an enrollee pool which has higher than average health care needs.

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