Opinion

One Person’s Junk Is Another’s Treasure

Recently, it was reported that Andy Slavitt, former head of the Centers for Medicare & Medicaid Services and the top official administering the Affordable Care Act from 2015-2017, criticized the Trump administration for allowing insurance companies to offer short-term medical plans, which have existed for decades and which Congress specifically allowed to continue when it passed the ACA, or “Obamacare.”

These plans are designed to cover those eligible for an interim period at a lower cost and without all of the required benefits of an ACA-compliant plan.  For those unable to afford an ACA plan, these temporary health insurance plans provide many, but not all, of the benefits of the more costly ACA plans.

In February, three federal agencies released a proposed rule that makes affordable health insurance more readily available to many people by leaving to each state the ability to determine for its residents the duration of short-term medical plans. This proposed rule reverses an ill-advised executive order issued under the previous administration that overrode state law by limiting the duration of these plans to fewer than 90 days.

Far from being a consumer protection, this previous executive order created a hardship for those with a need for health insurance for longer than three months by making the insured reapply every 90 days with new deductibles and copays and in many cases new waiting periods for pre-existing conditions rather than having the comfort of a policy of up to 364 days with a single deductible. This Trump modified rule is the subject of criticism from Slavitt, who suggests that these plans are “junk” coverage.

While it is true that short-term medical plans typically do not cover every essential health benefit that is mandated for ACA-compliant plans and do not have an unlimited maximum benefit, many people do not seek or require that level of coverage. For example, some short-term medical plans sold online cover most EHBs and provide up to $2 million of coverage. Hardly junk coverage.

What about affordability? Unless you are eligible for a subsidy, the monthly premium under an ACA-compliant plan can be as much as your mortgage payment, and the ACA plan can come with a deductible that most Americans can ill afford. The premium rate for a North Carolina ACA-compliant plan is approximately $470 per month for a woman in her thirties and with a deductible that requires her to pay up to $6,650 in medical costs before the insurance company begins sharing in those medical care costs. By comparison, that same person could acquire a short-term medical plan through one online provider for a monthly premium of $166 with a $2,500 deductible — a significant savings.

Even so, not everyone is eligible for a short-term medical plan because there are industrywide underwriting practices covering eligibility and pre-existing conditions.  However, for those who are eligible, by many measures, these plans are a good value. Some short-term medical plans have deductibles as low as $1,500 compared to an ACA-compliant plan with a $6,500 deductible.

Given the uncertainty of the future of the ACA, elimination of the premium subsidies and penalty, as well as the ever-increasing premium costs due at least in part to adverse selection, the administration is taking appropriate steps with the proposed modification of the rules to allow the states to determine what duration of these plans is in the best interest of their residents.

One size doesn’t fit all. A robust health insurance market serves the public best with a choice of insurance plans. It serves no purpose to give a pejorative label to short-term medical plans without facts to support it. Most health care insurance consumers would agree that they would prefer to have the option for plans with lower premiums and lower deductibles to reduce out-of-pocket expenses.

For many Americans who have limited resources after paying their monthly expenses, a short-term medical plan may be just what the doctor ordered.

 

Former Sen. E. Benjamin Nelson served in the United States Senate from 2001-2013, and he now works as a paid consultant to short-term medical plan providers.

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