The pain of short-term health insurance

The following editorial appeared in Saturday’s Washington Post.

The Trump administration recently unveiled a rule letting people buy “short-term” insurance plans that are not really short term and not really insurance – that is, they are exempt from nearly all of Obamacare’s major protections. This move will cause more pain for those who need insurance the most and create more trouble for states struggling to keep their health-care systems intact.

Obamacare prohibits insurance companies from turning away people with preexisting conditions, cutting people off when they get sick, denying essential care and charging people more based on health status or gender. None of these restrictions apply to short-term plans, which are supposed to be stopgap coverage. The administration wants to allow people to purchase “short-term” policies for up to 36 months and to sign onto another “short-term” plan after that.

Such plans are bound to be cheaper, because they can exclude customers who seem as though they might need care. They can exclude coverage for cancer, HIV, maternity care, mental health and even routine preventive care. People will end up discovering at the wrong time that their plans do not cover the treatments they need.

Yet some young and healthy people will take their chances on these plans. As these people leave the regulated Obamacare marketplaces, where premiums are higher because insurers must sell decent plans, sicker and older people will remain, causing their premiums to rise further. This could drive even more people out of the Obamacare market. When those who departed for skimpy short-term plans get sick and realize they need help affording essential care, they will either go bankrupt or, if the timing is right, reenter the Obamacare market and immediately start making expensive claims.

The Urban Institute, a nonpartisan think tank, predicts that the new shortterm rule and Congress’ repeal of the law’s individual insurance mandate will result in an 18.3 percent premium hike in the regulated Obamacare market next year in the 42 states and the District of Columbia, where short-term plans are allowed. A large proportion of Obamacare-buyers are protected from premium volatility through federal subsidies. But those who are not face more government-imposed pain.

The rule makes clear that states are still empowered to impose their own regulations on short-term plans – or to ban them entirely. States looking to avoid the bleak future the Trump administration has designed should do so.

If the administration’s short-term rule is ill-advised, another change announced Thursday makes more sense. The Centers for Medicare and Medicaid Services announced reforms to rules for “accountable care organizations.” These are innovative entities that allow doctors and hospitals to share savings if they drive down costs; conversely, doctors and hospitals owe refunds when costs are excessive. This arrangement makes sense. Yet the program has allowed providers a transition period of six years to collect money from savings – while not paying if costs are too high. The administration wants to cut to two years the period in which providers are allowed to assume zero risk. That shift might reduce participation in the organization program, a potential problem worth watching. But the government should not be faulted for asking providers to have more skin in the game, more quickly.