Short‐Term Plans: The Battle for Health Insurance Choice
Cato Event Podcast
Deep Dive
Why did the Biden administration propose changes to short-term health insurance plans?
The Biden administration proposed changes to short-term health insurance plans to encourage people to enroll in ACA plans, reduce spending on Obamacare subsidies by $120 million per year, and bring down ACA premiums by 0.5% by forcing healthy people to leave the short-term market.
What are the current rules for short-term health insurance plans?
Under current rules, consumers can purchase short-term health insurance plans with an initial contract period of up to 12 months and renew them for up to 36 months. Insurers can also offer renewal guarantees that allow enrollees to re-enroll without medical underwriting.
How do short-term health insurance plans compare to ACA plans in terms of cost and coverage?
Short-term health insurance plans often have lower premiums (up to 60% lower than the lowest-cost ACA plans) and lower deductibles. They may exclude some ACA-mandated benefits like maternity care but offer broader provider networks and more comprehensive coverage for high-cost medical events.
What risks do the proposed Biden administration rules pose to short-term health insurance enrollees?
The proposed rules would cancel short-term plans after just four months, leaving enrollees without coverage for up to 12 months if they develop expensive illnesses. This could result in uninsured periods and substantial medical bills for those affected.
What is the impact of the Biden administration's proposed rule on the ACA market?
The proposed rule aims to reduce ACA premiums by 0.5% by shifting healthier individuals from short-term plans to ACA plans, but it does not address the underlying issues in the ACA market, such as high premiums and declining insurer participation.
How do renewal guarantees in short-term plans benefit consumers?
Renewal guarantees allow consumers to re-enroll in short-term plans without medical underwriting, ensuring that they can maintain coverage even if they develop a costly illness. This reduces the risk of being uninsured and facing high medical bills.
What was the outcome of the Trump administration's 2018 rule on short-term health insurance plans?
The 2018 rule restored short-term plans to a 364-day contract period and allowed renewals for up to three years. It reduced the uninsured rate by an estimated 1.8 million people and provided a viable alternative to ACA plans.
How does the Biden administration's proposed rule affect unemployed individuals?
The proposed rule restricts short-term plans to four months, which is often shorter than the average unemployment duration. This leaves unemployed individuals without coverage for extended periods, increasing their financial and health risks.
What evidence suggests that short-term plans benefit the ACA market?
States that allow short-term plans have seen better trends in ACA markets, including higher exchange enrollment (63% increase), more insurers (105% increase), and lower premiums compared to states that restrict short-term plans.
What are the potential legal challenges to the Biden administration's proposed rule?
Legal challenges could argue that the rule is arbitrary, capricious, and contrary to law, as it cancels health insurance for sick individuals and creates gaps in coverage, which contradicts congressional intent to reduce uninsurance and protect those with pre-existing conditions.
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