Are short-term health insurance plans ‘skimpy’ as the Biden administration says?

Are short-term health insurance plans ‘skimpy’ as the Biden administration says?

Qthe Biden administration recently proposed cutting back on short-term, limited-duration insurance plans for healthcare, which it derides as “skimpy” coverage.

The Trump administration had expanded that form of coverage, making it an effective workaround of the Affordable Care Act, former President Barack Obama’s signature domestic achievement. The 2018 Trump administration federal rule allowed insurance companies to offer healthcare coverage outside the ACA framework.

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Now the Biden administration aims to scale these plans back. Cabinet agencies have dropped a rule in the regulatory pipeline to that effect. The departments of Health and Human Services, Labor, and the Treasury jointly issued a notice of proposed rulemaking on July 7.

If finalized, the new rule would “limit the length of the initial contract period to no more than three months and the maximum coverage period to no more than four months,” the departments said in a news release.

That would be significantly down from what is currently allowed. Short-term, limited-duration insurance health insurance contracts currently start at under one year and can be extended for up to three years total with one insurance provider.

Healthcare experts gave this proposal a mixed review.

“For equivalent premiums, [short-term, limited-duration insurance] plans have lower out-of-pocket costs, broader networks, and higher satisfaction rates than plans available on Obamacare’s exchange,” Chris Pope, a senior fellow at the Manhattan Institute, told the Washington Examiner. “It’s not clear how forcing people off their insurance plans after a few months is going to achieve anything but leave them worse off.”

Nidhi Hegde, a director at the American Economic Liberties Project, cheered the Biden administration’s attack on “junk insurance” and “junk fees.”

“The president’s latest crackdown on junk fees and deceptive practices across healthcare sends a clear message: Working families come before corporate profits,” Hegde said in a statement. “From exposing hidden facility fees to leading an interagency effort to protect patients from unfair medical debt and risky medical credit cards, it’s clear this administration is working to make sure big corporations can’t abuse their market power to cheat consumers.”

Matthew Fiedler, senior fellow at the Brookings Institution’s Schaeffer Initiative for Health Policy, told the Washington Examiner that the rule change would be a mixed bag.

“The proposed change will reduce the extent to which the short-term, limited duration and fixed indemnity markets can serve as parallel individual markets subject to fewer rules,” Fiedler said. “There are trade-offs here, but I generally see this as the right direction for policy to be moving.”

The shift to Obamacare will take some getting used to for some users, Fiedler admits, but he thinks that it will ultimately have knock-on good effects.

“One effect will be to shift some people who are currently buying these types of plans into the ACA-compliant market,” he said. “Some of the enrollees who shift over will find that they are better off, as many people who buy short-term, limited duration or fixed indemnity products are likely to do so without realizing how limited the benefits are.”

Fiedler added, “Others, generally higher-income and healthy enrollees, will be worse off in the ACA-compliant market, but their presence in the ACA-compliant market will reduce premiums and, in turn, federal subsidized costs and costs borne by unsubsidized enrollees.”

Fiedler noted, “That shift of cost burdens away from the federal government and unsubsidized enrollees and toward higher-income healthy enrollees is generally desirable, in my view.”

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There are also risks that this rule change could mean more people go without health insurance.

“One potential concern with this policy is that some enrollees currently in these types of plans will become fully uninsured instead of obtaining ACA-compliant plans,” Fiedler said. “In practice, given the relatively generous subsidies that now exist for people who buy coverage on the marketplaces, I think these types of shifts will be relatively rare.”

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