These plans can also deny coverage for care of preexisting conditions, even if the preexisting condition in question hadn’t yet been diagnosed at the time the person enrolled.
People often don’t realize they’ve bought a worthless product until it’s too late — when they get hit by a bus, say, or are diagnosed with a brain tumor.
Such loopholes might seem like no big deal until you find yourself falling through one. The Trump administration made sure more people did by allowing these allegedly short-term plans to last as long as 364 days, rather than the three-month max that had been in place, and to be renewed for up to three years.
This made them look a whole lot like regular plans. Plus, because short-term plans are mega-profitable for insurers, brokers can get much larger commissions for steering hapless customers into them. So, many did.
Exactly how many were lured by this policy change is unclear; the data is lousy, precisely because these products are so unregulated. A recent estimate from the Urban Institute ballparked the number of people enrolled in individual plans that are noncompliant with Obamacare protections at 2.5 million.
The proliferation of short-term junk plans affects even consumers who don’t get duped by them. That’s because these cheaper plans disproportionately siphon healthier (i.e., lower-cost) people out of the broader individual insurance marketplaces. People who have chronic conditions or otherwise know they will need more substantial coverage are more likely to stay in the regular marketplace pool, driving premiums there ever higher.
Last week, however, the Biden administration announced a rollback of this Trump-era expansion of short-term health plans.
In a proposed rule, Biden officials said those already in these skimpy Trump-blessed plans can continue in them, if they so choose. (“There were some hard lessons learned from the ‘if you like your plan you can keep it’ blowback a decade ago,” surmises Georgetown University health scholar Sabrina Corlette.) But going forward, any new “short-term, limited duration” plans would need to be truly short-term (up to three months) and truly limited-duration (renewed for up to one additional month only).
Critically, short-term plans must also provide clearer language about what care they do and don’t cover, and under what circumstances. People who choose to buy junk must know upfront that they’re buying junk.
The White House has marketed this rule as part of “Bidenomics,” though it might be more easily understood as simply pro-consumer. It also dovetails nicely with other actions the administration has taken to expand access to coverage, including outreach to encourage eligible Americans to enroll in marketplace plans and patching the so-called family glitch (a regulatory accident that had blocked a lot of families from accessing subsidized health coverage).
Most important, through last summer’s Inflation Reduction Act, Biden extended the enhanced premium tax credits available for plans on the individual marketplace.
This has meant that millions more Americans can get solid health-care coverage that not only is affordable but also, in many cases, has an out-of-pocket premium of zero dollars. And unlike with those junk insurance plans, the low price tag here isn’t a red flag; these plans actually do provide comprehensive coverage, including for people with preexisting conditions.
It’s not a bait-and-switch. It’s a real subsidy — and one that will likely drive down premiums overall, on average, by drawing more healthy people into the broader marketplace risk pool.
Our health-care system is still kludgy. It still allows too many Americans to fall through the cracks. But small unsung fixes such as this are achievements worth celebrating.
