What to Know
- Next year, there will be no tax penalty for someone who opts for short-term coverage
- Critics call the short-term plans "junk insurance"
- Some industry officials said they're developing "next generation" short-term plans that will be more responsive to consumer needs
Consumers will have more options to buy cheaper, short-term health insurance under a new Trump administration rule, but there's no guarantee the plans will cover pre-existing conditions or provide benefits like coverage of prescription drugs.
Administration officials said Wednesday the short-term plans will last up to 12 months and can be renewed for up to 36 months. With premiums about one-third the cost of comprehensive coverage, the option is geared to people who want an individual health insurance policy but make too much money to qualify for subsidies under the Affordable Care Act.
"We see that it's just unaffordable for so many people who are not getting subsidies and we're trying to make additional options available," said Health and Human Services Secretary Alex Azar. "These may be a good choice for individuals, but they may also not be the right choice for everybody."
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Buyers take note: Plans will carry a disclaimer that they don't meet the ACA's requirements and safeguards. And there's no federal guarantee short-term coverage can be renewed.
Democrats immediately branded Trump's approach as "junk insurance," and a major insurer group warned that consumers could potentially be harmed. Other insurers were more neutral, and companies marketing the plans hailed the development.
It's unclear how much mass-market appeal such limited plans will ultimately have. State insurance regulators also have jurisdiction, and many states may move to impose their own restrictions. Federal officials said they anticipate a slow take-up, not sweeping changes.
Unable to repeal much of "Obamacare," the Trump administration has tried to undercut how it's supposed to work and to create options for people who don't qualify for financial assistance with premiums.
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.
A major insurer group expressed strong concerns.
"The broader availability and longer duration of slimmed-down policies that do not provide comprehensive coverage has the potential to harm consumers, both by making comprehensive coverage more expensive and by leaving some consumers unaware of the risks of these policies," said Justine Handelman of the Blue Cross Blue Shield Association, whose members are a mainstay of ACA coverage.
But 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.
Short-term insurance 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.
Senate Democratic leader Chuck Schumer of New York said Democrats will "do everything in our power" to block the administration. It wasn't immediately clear how that might happen.
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.
Azar said they're tailor-made for the "gig economy."
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 UnitedHealthcare 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 said they're a "rational decision" for some people.
"It's a way better alternative to not being insured," said Jeff Smedsrud of Pivot Health.
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 health care options that cover less.
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 plan 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.
But a recent Kaiser Foundation analysis found turmoil in the unsubsidized market after two years of double-digit premium increases forced many consumers to drop out or seek other coverage.