Short-Term Health Plans Provide Alternative to Premium Hikes

Some in Washington would have us believe there is only one way to provide relief to the millions of Americans trapped between paying the high cost of Obamacare or dropping coverage altogether: Send billions of taxpayer dollars to health insurance companies.

They’re wrong. There is a better way.

Short-term plans are just what the name implies – coverage for three to 12 months, but in most cases at a much lower cost to consumers because they are only paying for services they need and no longer paying for care they don’t need. For example, that could mean men no longer paying for maternity care. As a result of this increased customization, sky-high deductibles may finally start coming down for some Americans.

To that end, the Trump administration has proposed a rule that would reverse an Obama administration regulation limiting to three months the amount of time individuals could be enrolled in short-term health plans.

Under the proposed rule, Americans could enroll for up to a year, allowing them to customize coverage to better fit their individual health needs and their budgetary constraints.

The administration has support from Congress, including Sen. John Barrasso (R-Wyo.), who recently introduced legislation that would codify the proposed rule into law.

Obamacare defenders contend that taxpayer subsidies soften the blow of repeated rate hikes, and that the solution is to increase payments to insurers to further restrain cost increases. But what they fail to mention is that there are many Americans — one estimate pegs the number at 17 percent during the 2017 open enrollment period — who don’t qualify for subsidies and are left to choose between paying sky-high premiums or going without coverage.

These families are paying, on average, close to $1,168 per month, or $14,016 annually, a 17 percent increase from last year. Individuals are not faring any better, with most paying an average of $440 per month, or about $5,280 annually – a 16 percent jump.

The solution is not to increase taxpayer subsidies for insurers, but instead to provide Americans with more choices, including expanding short-term plans, that can dramatically cut rates for millions of Americans.

An analysis by the Centers for Medicare and Medicaid Services found that short-term plans are generally more affordable than ACA-compliant plans. For example, in the fourth quarter of 2016, a short-term plan was costing approximately $124 a month compared to $393 for someone who does not qualify for subsidies purchasing an ACA-compliant plan.

More choice at a dramatically lower cost, and empowered consumers to boot. What’s not to like?

Some are also saying that, without receiving generous government subsidies, health insurance companies will have no choice but to hike rates in order to stay in business. But upon closer inspection, it’s clear that many health insurance companies are doing just fine without additional subsidies.

Congress has thus far held firm against insurers’ demands for billions more in taxpayer subsidies, but political pressure is mounting as an election nears and further rate hikes loom on the horizon.

If lawmakers really want to help families struggling with high premiums, a better approach is working with the administration to expand short-term plans and explore other regulatory fixes to provide Americans with more choices. These could include giving patients more control by expanding health savings accounts that allow people to save and pay for their health care needs with pre-tax dollars.

Congress could also streamline the Food and Drug Administration approval process to expedite treatments and medications for the people who need them the most. Finally, lawmakers could also consider empowering states to reform Medicaid to improve health outcomes for the most disadvantaged.  

Any or all of those options would be preferable to giving billions in subsidies to the insurance industry and depriving Americans of the ability to access quality health care at a price they can afford to pay.


Nathan Nascimento is executive vice president for Freedom Partners Chamber of Commerce.

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