Short-term and Association Health Plans
An escape hatch into the garbage compactor
In the original Star Wars, in trying to rescue Leia, our heroes find themselves trapped between stormtroopers closing in on both sides. As the pressure rises, Leia finds an escape route — the garbage chute. Jumping down the chute gets them out of the line of fire, but there’s something lurking in the water and the walls are about to move.
Many families are feeling a similar pressure as health insurance premiums begin to rise. The Affordable Care Act may have enabled them to get coverage, but it’s consistently getting more expensive. As a way out of this situation, the Trump administration is introducing new insurance schemes: short-term and association health plans. The plans will have low premiums, but will give customers only the barest financial protections.
In the movie, it’s a pivotal scene where the characters begin to trust each other. For patients in the real world, many are about to find themselves in deep water with the walls closing in.
In one of his first public appearances after being ushered out of his post as HHS Secretary, Tom Price told attendees at the World Health Care Congress that the repeal of the ACA’s individual mandate would raise prices for many Americans. The remark made headlines as it was in direct contrast to what Price was saying in 2017 as he led the effort to repeal and replace the ACA. Yet the message itself was no surprise, apart from who delivered it.
Economists have long warned that striking the individual mandate would lead to higher insurance premiums. As insurance premiums rise, healthy people will opt out of coverage. The ones left buying insurance are the ones who value it most — the sickest patients, with the most expensive care. New research shows that this is happening already: surveys by the Commonwealth Fund and Gallup Polling shows that the uninsured rate is rising for the first time since the ACA as families lose confidence in their ability to pay for health care.
It’s also the time of year where insurers begin to submit their pricing plans for the next year. Early submissions are showing that insurers are bracing for a smaller pool of sicker customers. The result is that insurers are asking for large premium increases. In Virginia and Maryland, the first states to submit next year’s rates, premiums will rise an average 30%, with one Maryland plan jumping 91%.
Enter short-term and association health plans, the Trump administration’s answer to higher premiums and getting as many people enrolled in insurance as possible. It’s also a last-ditch attempt to thwart rising political pressure as the 2018 midterms approach and market stabilization legislation has died in Congress. Yet both plans cut corners to cut costs.
The first idea is the expanded use of short-term, limited duration health plans. Short-term plans are holdovers from the pre-ACA individual market but didn’t satisfy the individual mandate because they covered a pre-set, limited period. These plans were most often used as a stop-gap measure when someone needed temporary insurance but expected to be covered again by a different plan soon. Most plans provide coverage for a three-month period (the new proposal allows them to cover a period of less than a year) for about 20% less than an ACA plan. Yet these plans have significant drawbacks. A survey by the Kaiser Family Foundation found that in these plans:
- 43% do not cover mental health services
- 62% do not cover substance abuse treatment
- 71% do not cover outpatient prescription drugs
- No plans covered maternity care
Short-term plans can also be medically underwritten, meaning customers can be turned away or charged more because of their gender, age, or health status and pre-existing conditions. Plans can also impose annual and lifetime limits on benefits, but do not have to set any limits on out-of-pocket spending by patients.
The second proposal, an expansion of association health plans, is currently working its way through the Department of Labor. While association health plans have been around a while, this plan would expand the types of organizations that could offer these group insurance plans. Previously intended for small businesses or groups of employers, the proposal allows individual customers to sign up for association plans, and exempts plans from ACA protections. Association plans wouldn’t be able to turn away individuals due to health status, but lack many of the same protections as short-term plans: price differentials by age, and gender; lack of mental and behavioral health coverage and maternity benefits; and no necessary protection of prescription drugs or preventive care.
Ironically, a new report by the head actuary at the Centers for Medicare and Medicaid Services points out that these plans will ultimately raise government spending in the individual market (trying to cut costs while ultimately raising spending seems to be a repeating motif for Trump). While short-term and association plans will cost virtually nothing, siphoning off healthy individuals from the ACA market pool of patients makes the market more expensive, leading to a $1.2 billion increase next year, and additional $40 billion in subsidies over the next ten years.
Patient advocates and physician groups have slammed the proposed rules for opening customers up to financial and medical risk, calling the plans “junk insurance.” Even insurance companies have a bad feeling about this, disparaging the plans citing concerns that they would increase the number of uninsured. However, as midterm elections loom on the horizon, this is likely the extent of action to relieve consumers from rising insurance premiums. For many, it will be a dangerous choice between cheaper premiums and having meaningful coverage.
