Trump Has Brought Back the Kind of Junk Health Insurance That Obamacare Was Meant to Ban
The Affordable Care Act was designed, in large part, to ban cruddy health insurance. Before the law was passed, shoppers often tried to save money on their coverage by purchasing plans with meager benefits that didn’t help much if they got sick with cancer or needed an expensive prescription or were badly injured in a car wreck. Obamacare sought to end that by requiring health plans to cover a standard package of services, no matter who bought them.
The Trump administration is now bringing cruddy back. In yet another aggressive move to undermine the Affordable Care Act, it issued a new regulation on Wednesday that will make it easier for companies to sell inexpensive insurance plans that are not required to offer basic benefits and can discriminate against Americans with pre-existing conditions.
Worse, the decision could ultimately drive up the price of insurance on Obamacare’s exchanges by creating a parallel, lightly regulated market for cheap coverage that siphons off healthier customers.
The new rule will allow companies to offer longer-lasting versions of what the industry calls “short-term, limited duration” health policies. Under old regulations put in place by the Obama administration, these plans could last no more than three months at a time before customers had to reapply for them. Going forward, they will be able to last as long as 36 months.
Short-term health plans are often dismissed as junk insurance, and for good reason. They were originally meant as a temporary option for people who found themselves with a brief break in their coverage, such as after losing a job. Unlike the coverage sold on Obamacare’s exchanges, they are not required to offer a minimum-benefits package; they can leave out things like maternity care, mental health, or prescription drugs. They can cap coverage and impose higher deductibles. Carriers also underwrite them, meaning they are permitted to charge customers more—or reject them outright—based on their health.
Because they can offer skimpy benefits to a narrow group of healthy customers, these plans are naturally attractive to people without much in the way of immediate medical needs. (Of course, when those people get sick, they may feel differently.)The Obama administration clamped down on the plans in 2016 by limiting their duration, after it realized that they were drawing younger, healthy adults away from market Affordable Care Act’s market. This was happening despite the fact that the policies plans did not count as health insurance for the purposes of fulfilling the law’s individual mandate, meaning people who relied on them still got stuck paying a tax penalty. Such was the allure of dirt-cheap insurance.
By letting insurance companies offer these plans for up to three years, the Trump administration is basically taking the “short” out of short-term. Because Republicans also eliminated the individual mandate as part of the tax law they passed last year, there’s also no longer a financial incentive to buy comprehensive coverage through the exchanges instead of a “limited duration” plan. Between those two moves, Trump and his GOP allies are essentially legalizing the very bare bones coverage Obamacare was designed to wipe out.