As President Obama pushed for the Affordable Care Act, he pledged at least 37 times: “If you like your healthcare plan, you can keep it.” Yet, when the law went into effect in January 2014, plans priced in proportion to individuals’ healthcare risks (which had dominated health insurance markets in most states) were suddenly prohibited. Premiums faced by those purchasing coverage have since soared – by an average of 105 percent over the subsequent four years.
On August 1st, the Trump administration expanded consumer protections applying to short-term limited duration health insurance (STLDI). This, combined with last December’s repeal of the individual mandate, has effectively restored a quality affordable alternative to plans subject to the ACA’s regulations – while allowing people who like their Obamacare plans to keep them too.
A week before the 2016 election, the departing Obama administration had become concerned that STLDI plans (which were exempt from ACA regulations, and whose premiums averaged $124 per month) were proving too attractive as an alternative to ACA plans (which averaged $393). They proposed a rule limiting the duration of STLDI plans to three months and prohibiting insurers from guaranteeing their renewal to individuals who developed major illnesses.
The subsidies and regulations established for ACA plans have merit as a means of extending coverage to low-income individuals and those with major pre-existing conditions. But not everyone has the same insurance needs, and inflating the cost of coverage for people who purchase insurance before they get sick has been a bad way to finance a safety net for those with major pre-existing conditions. Since subsidies for the exchange are automatically provided by law, such an approach is unnecessary and unfair, and has forced millions to drop health insurance altogether.
The Trump administration deserves credit for the thoroughness of its administrative rule restoring STLDI plans, which was originally proposed in an executive order last October. This reform expands consumer protections as well as choice – addressing concerns of Democrats who deemed STLDI plans “junk insurance.” By extending the maximum duration of plans from three months to a year, it protects individuals who would otherwise find their deductibles reset every three months. The reform also allows insurers to protect enrollees from the loss of coverage and rate increases for up to three years. Extending the duration of these plans also helps to greatly reduce their administrative costs, which are largely associated with enrollment, by spreading them out over much extended terms.
States, which will be responsible for regulating this greatly expanded market, should make the most of the opportunity, by helping to make STLDI plans more widely available and requiring that insurers guarantee their renewability. By doing so, they would help complete the restoration of affordable plans of the sort which prevailed prior to the ACA, which Obama promised Americans that they could keep, and which so many prefer to the overpriced options currently available on the exchange.
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