Just over two weeks ago, U.S. District Court Judge Richard Leon upheld a Trump administration rule that expands access to short-term, limited duration health plans. The ruling represents a major victory for those in need of affordable health coverage.
But the plaintiffs are appealing the ruling. And many states have already implemented rules restricting, if not banning outright, short-term plans. They’re more interested in protecting Obamacare than in ensuring that consumers have access to affordable health coverage.
Historically, short-term plans have provided temporary coverage, often to people between jobs, for up to a year. Only individuals and families can purchase them; they’re not a form of employer-sponsored coverage. They’re also not subject to Obamacare’s cost-inflating regulations. For example, they don’t have to cover the ten “essential” health benefits Obamacare mandated starting in 2014—some of which many beneficiaries will never use, like maternity or substance abuse care.
As a result, they’re much cheaper than the conventional health insurance plans available through Obamacare’s exchanges. A number of Americans turned to short-term plans as an alternative to Obamacare-approved coverage. From 2012 to 2016, enrollment in such plans surged 121%.
That made the Obama administration nervous. The exchanges needed young, healthy people to pay premiums into the risk pool in order to offset the costs of older, generally less healthy Americans. If inexpensive short-term plans siphoned off those young, healthy people, then premiums for exchange plans would have to be even higher. Higher prices would’ve driven even more people off the exchanges, and so the market would’ve fallen apart.
So the Obama administration tried to kneecap the market for short-term plans by setting their maximum duration at three monthseffective April 2017.
In doing so, the Obama administration made it too risky for people to purchase short-term plans as alternatives to exchange coverage. If a patient got sick or injured and his short-term plan expired, then his insurer could decline to renew the policy. He’d then would have to wait until the next open enrollment period to get coverage through the exchanges.
Last August, the Trump administration reversed that decision—and restored the maximum duration for short-term plans to 12 months. It also authorized insurers to renew short-term plans for up to three years.
Those decisions expanded the availability of affordable coverage significantly. A 2018 report by Agile Health Insurance revealed that premiums for short-term plans were 75% cheaper, on average, than unsubsidized bronze exchange plans—the least generous. That amounts to savings of more than $350 every month.
A more recent analysis by the Manhattan Institute arrived at a similar conclusion. For example, compared to a bronze Obamacare plan, a 30-year-old nonsmoker in Fulton County, Georgia, could save 29% on premiums, plus have a lower deductible and out-of-pocket maximum, with a short-term plan. Many short-term plans give patients access to a wide range of doctors and hospitals—in some cases, wider than exchange plans.
Unsurprisingly, more than nine in ten short-term enrollees are satisfied with their coverage. That’s far higher than the satisfaction rate for Obamacare plans.
Critics of short-term plans claim that they undercut exchange plans by “making them increasingly unaffordable and unsustainable for consumers who have nowhere else to turn.” Several states have banned short-term plans or sharply restricted them, citing similar concerns. Short-term plans are unavailable in 10 states, and 21 states limit their duration to six months or less.
But there’s not much evidence to support their case. Since President Trump’s rule went into effect in October, enrollment in Obamacare’s exchanges did not shrink any more than usual. It declined 3% from 2018 to 2019, about the same rate as every year since 2016.
Short-term plans also did not cause Obamacare premiums to spike. In fact, states that prohibited short-term plans or banned their renewal, saw their premiums increase substantially, according to a report from the Manhattan Institute. For example, premiums for the second-cheapest silver plan jumped 23% in Vermont, 15% in New York, and 8% in Rhode Island.
Given the evidence, Judge Leon was right to note in his ruling, “Not only is any potential negative impact from the 2018 rule minimal, but its benefits are undeniable.”
Short-term plans provide consumers with coverage they can afford—something Obamacare has failed to do.