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Trump lifted restrictions on ‘short term’ health insurance plans. Here’s what that means for consumers

Health and Human Services Secretary Alex Azar said Wednesday that the administration would support a cheaper form of short-term health insurance that health policy experts say would offer fewer protections for consumers and limit coverage of essential benefits like mental health, maternity care and prescription drugs.

The Trump administration announced its support for such plans in June 2017 and flagged them as a priority in an executive order signed in October. Today, it lifted regulations barring their availability.

Loosening restrictions on these plans will “help out the 28 million Americans who have been crowded out” of the individual marketplaces set up under the Affordable Care Act, Azar said.

“We believe strongly in giving people options here to try to make affordable options available,” Azar said.

But some health care experts caution that these plans, while cheaper, may ultimately lead to dropped coverage or none at all, if the person is confronted by an unexpected illness or accident.

Here’s a look at what the Trump administration changed on short-term, limited duration health plans, what supporters and critics say, why it matters and what’s next.

What are the changes?

Federal estimates suggest 1 million Americans may opt for short-term, limited duration plans, said Health Secretary Alex Azar during a press briefing Wednesday. But estimates from the Urban Institute predict a much higher number, as many as 4.3 million Americans, may choose these plans, said Linda Blumberg, an fellow at the Urban Institute’s Health Policy Center.

Available starting Jan. 1, 2019, these insurance plans will be cheaper, but that’s because they do not have to offer essential health benefits required by the Affordable Care Act for comprehensive health plans. These benefits include:

  • Ambulatory patient services
  • Emergency services
  • Hospitalization
  • Maternity and newborn care
  • Mental health and substance use disorder services
  • Prescription drugs
  • Rehabilitative and habilitative services, along with devices
  • Laboratory services
  • Preventive and wellness services and chronic disease management
  • Pediatric services, including oral and vision care

Under the short-term plans, an insurance company does not have to accept your application for insurance. If you are accepted but your health status changes (perhaps you receive an unexpected diagnosis or are involved in an accident), an insurance company can charge you a higher premium or drop your coverage. Plans may come with annual or lifetime caps on the amount of coverage an insurer will provide. These plans may be attractive to young, healthy clients, or people who are between jobs.

One revision made as a result of the public comment period stipulated that applications and contracts for these plans “prominently” display a warning that short-term health insurance plans may come with gaps in coverage.

“Be sure to check your policy carefully to make sure you are aware of any exclusions or limitations regarding coverage of preexisting conditions or health benefits,” the final rule said.

For decades, short-term, limited duration plans were available in the United States. In 2016, the Obama administration capped these plans at 90 days to prevent companies from targeting and poaching healthy customers within individual marketplaces, Blumberg said. Now, insurers can offer these plans for less than 12 months and up to 36 months.

What supporters say

These plans provide people with more affordable choices for health care, the administration says.

Azar rejected the idea that these plans are part of a larger effort by the administration to destabilize the Affordable Care Act and instead suggested Obamacare was fatally flawed by design.

“The Affordable Care Act is sabotaging itself by its own structure,” Azar told reporters Wednesday. “This administration — we’re working to try to provide affordable options for individuals.”

Making these plans more widely available puts people “in the driver’s seat,” Azar said. And, he said, no federal money goes into these plans.

These plans aren’t transformational and the coverage won’t be wonderful, said Thomas Miller, a resident fellow at the conservative American Enterprise Institute. But the administration’s decision “will add a little bit of coverage for people who otherwise can’t get it.”

“Is something better than nothing when nothing is going to increasingly be the case for these people who are left on the fringes of the market?”

What critics say

These plans could raise costs for sicker people and expose people to risk they would not have under more comprehensive plans that comply with the Affordable Care Act, said Matthew Fiedler, an economist fellow with the Brookings Institution and a chief economist on the Council of Economic Advisers during the Obama administration.

“I view the policy as a step in the wrong direction,” Fiedler said.

More broadly, expanding access to these cheaper, skimpier plans undermines and weakens individual insurance markets established under the Affordable Care Act, Blumberg said. There is nothing that can stop a person from leaving the marketplace to purchase one of these short-term plans, she said, leaving behind sicker patients who can’t afford anything else.

“These are the markets that will become more expensive, will continue to weaken and access to insurance for people who need medical care is going to decrease,” she said.

Why it matters

Since 2016, the rate of uninsured, working-age Americans has gone up, according to a report released in May by the Commonwealth Fund. Millions of Americans do not have health insurance coverage. Many cannot afford it or choose to go without it. The Trump administration is responding to those people who want more choice for health care and health coverage, Miller said.

“It matters to people who don’t feel like they have very attractive options currently,” he said.

One important thing to remember about these short-term plans is that the federal government holds no jurisdiction over them. States do.

A few states have already taken action against allowing insurers to offer these plans to their residents, including Massachusetts, New Jersey, New York, Vermont and Hawaii. But some states will be slower to rein in insurers who offer short-term plans because they “don’t deal with these issues as frequently,” Miller said.

Pitting cheaper plans with less coverage against plans that comply with the Affordable Care Act will “undermine the latter considerably,” Blumberg said.

“These harken back to pre-ACA days,” she said. “There wasn’t much regulation of those policies at all.”

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