The Trump administration is clearing the way for insurers to sell short-term health plans as a bargain alternative to pricey Obama-law policies for people struggling with high premiums.
But the policies don’t have to cover existing medical conditions and offer limited benefits. It’s not certain if that’s going to translate into broad consumer appeal among people who need an individual policy.
Officials say the plans can now last up to 12 months and be renewed for up to 36 months. But there’s no federal guarantee of renewability. Plans will carry a disclaimer that they don’t meet the Affordable Care Act’s requirements and safeguards. More details were expected Wednesday.
“We make no representation that it’s equivalent coverage,” said Jim Parker, a senior adviser at the Health and Human Services Department. “But what we do know is that there are individuals today who have been priced out of coverage.”
Unable to repeal much of the Obama-era law, Trump’s administration has tried to undercut how the law is supposed to work and to create options for people who don’t qualify for subsidies based on their income.
Officials are hoping short-term plans will fit the bill. Next year, there will be no tax penalty for someone who opts for short-term coverage versus a comprehensive plan, so more people might consider the option. More short-term plans will be available starting this fall.
Critics say the plans are “junk insurance” that could lead to unwelcome surprises if a policyholder gets sick, and will entice healthy people away from the law’s markets, raising premiums for those left. Under the Obama administration, such plans were limited to three months’ duration. Some states do not permit them.
President Donald Trump has been enthusiastic. “Much less expensive health care at a much lower price,” he said, previewing the plans at a White House event last week. “Will cost our country nothing. We’re finally taking care of our people.”
The administration estimates that premiums for a short-term plan could be about one-third the cost of comprehensive coverage. A standard silver plan under the Obama law now averages $481 a month for a 40-year-old nonsmoker. A short-term plan might cost $160 a month or even less.
But short-term insurance clearly has fewer benefits. A Kaiser Family Foundation survey of current plans found none that covered maternity, and many that did not cover prescription drugs or substance abuse treatment — required under the Obama law. They can include dollar limits on coverage and there’s no guarantee of renewal.
At a hearing Tuesday, Sen. Patty Murray, D-Wash., called the administration’s anticipated action “a new sabotage step that will do even more to let insurance companies offer junk plans.”
Short-term plans have been a niche product for people in life transitions: those switching jobs, retiring before Medicare eligibility or aging out of parental coverage.
Some in the industry say they’re developing “next generation” short-term plans that will be more responsive to consumer needs, with pros and cons clearly spelled out. Major insurer United Healthcare is marketing short-term plans.
Delaware insurance broker Nick Moriello said consumers should carefully consider their choice.
“The insurance company will ask you a series of questions about your health,” Moriello said. “They are not going to cover anything related to a pre-existing condition. There is a relatively small risk to the insurance company on what they would pay out relative to those plans.”
Nonetheless, the CEO of a company that offers short-term plans says they’re a “rational decision” for some people.
“It’s a way better alternative to not being insured,” said Jeff Smedsrud of Pivot Health. “I don’t think it’s permanent coverage. You are constantly betting that for the rest of your life you won’t have any health issues.”
Smedsrud said most plans restrict coverage for those who have sought treatment for a pre-existing condition over the past five years.
Short-term plans join “association health plans” for small businesses as the administration promotes lower-cost insurance options that cover less. Federal regulations for association health plans have been approved. Such plans can be offered across state lines and are also designed for self-employed people.
The nonpartisan Congressional Budget Office estimates that roughly 6 million more people will eventually enroll in either an association plan or a short-term plan. The administration says it expects about 1.6 million people to pick a short-term when the plans are fully phased in.
About 20 million are covered under the Obama law, combining its Medicaid expansion and subsidized private insurance for those who qualify.
Enrollment for the law’s subsidized private insurance is fairly stable, and HealthCare.gov insurers are making money again. Blue Cross and Blue Shield of North Carolina just announced it will cut Affordable Care Act premiums by 4 percent on average next year.
But a recent Kaiser Foundation analysis found turmoil in the unsubsidized market.