The Trump administration’s Department of Health and Human Services released a draft rule Tuesday morning allowing insurance companies to sell skimpy short-term health plans that don’t comply with the Affordable Care Act’s regulations. These plans, which currently can only be used for three months, will now be allowed up to a year, and will be allowed to turn away people with pre-existing conditions or charge them higher premiums.
On a call with reporters on Tuesday, CMS Administrator Seema Verma spent several minutes painting the Affordable Care Act as a disaster, pointing to rising insurance premiums, the many states and counties that have only one insurer, and the 28 million people who remain uninsured—though all of these problems existed prior to the ACA.
“The current system is simply failing too many of our fellow Americans,” she said. “These high-value, short-term insurance products are designed for people who find Obamacare plans too expensive, or who find themselves between jobs. While in the past these plans have been a bridge, now they can be a lifeline.”
Verma said that the draft rule, which now enters a 60-day comment period, requires insurers marketing these short-terms plans to the public to “prominently display” what they do and do not cover—to prevent someone from unknowingly buying a plan and then finding themselves with a heap of medical bills for services not covered. Because the plans are free from Obamacare’s Essential Health Benefits rule, they are not required to cover prescription drugs or emergency room visits.
Many health care experts and economists say the sale of these skimpy “junk insurance” plans will draw younger and healthier people out of Obamacare’s individual market, making the remaining risk pool older, sicker, less stable, and more expensive.
Verma said Tuesday that her department’s independent actuaries predict that just 100,000 to 200,000 people will shift from the ACA individual market to these short-term plans, and insisted that shift will not significantly impact premiums for the people who remain because they need comprehensive insurance. Instead, she said, the short-term plans will mainly draw in people who currently have no insurance at all.
“There are healthy people sitting on the sidelines without coverage,” Verma said.
The text of HHS’ draft rule, however, notes that the drain of those younger and healthier people from the individual market is expected to both raise premiums and subsequently raise federal tax credits.
The Association of Health Insurance plans (AHIP) is sounding the alarm as well.
“We remain concerned that expanded use of short-term policies could further fragment the individual market, which would lead to higher premiums for many consumers, particularly those with pre-existing conditions,” AHIP’s Kristine Grow said in a statement Tuesday.
