Trump’s health care executive order is full of empty promises

Donald Trump’s executive order loosening restrictions on association health plans and short-term coverage is like eating a pile of empty carbs: it may taste good, but you will squander calories without giving your body what it needs. An hour later, you’ll be hungry again.

In the health policy context, this means rather than duping consumers with deceptively cheap, but inadequate, health insurance, policy makers should focus instead on providing consumers incentives to buy higher-quality plans to make them more affordable for all. 

{mosads}Association plans, created by small businesses banding together to buy health insurance, could theoretically lower prices by aggregating small groups to more effectively spread risk and cost. In reality, however, only employers with young, healthy workers would save money. Employers with older, sicker employees would likely pay more or be excluded.

Short-term plans, which the administration aims to use to inject choice and competition into the individual insurance market, could offer cheaper alternatives in insurance marketplaces. However, these plans typically cover fewer services than marketplace, employer-based, and individual plans. They might be better referred to as “Get-what-you-pay-for plans.”

Proponents argue that consumers should be free to make those trade-offs, and we agree that individual preferences could legitimately lead people to choose these skinny plans. But bare bones coverage may offer so little value that people remain financially vulnerable when they get sick and need protection most.

When you pay less for little or no value, it still feels like too much. It is impossible to hide the impact of too much junk food from your bathroom scale; similarly, financial downsides of insufficient coverage reveal themselves to consumers who assumed they would always be healthy but wind up sick or injured and in need of now more expensive care.  

One participant interviewed in our research on consumer behavior in health care purchasing told us about her friend, covered via an association health plan, who is still paying off the $17,000 bill for the birth of her youngest child. The child is now two years old. For that family, perhaps the apt analogy for these plans is not junk food but a poison apple: it looks good for you, but you eat it at your peril.

The negative impacts of substandard plans do not only affect individuals who may willingly make those choices. These thin-coverage plans also risk raising premiums for higher-quality plans. As healthier people are drawn out of the marketplace into cheaper plans, the remaining population is on average sicker and more expensive. With fewer healthy people in the pool, marketplace premiums will rise for people who are sick, effectively returning us to the days of pre-existing condition prohibitions.

Instead of peddling poison apples, legislators should seek to encourage marketplace enrollment. One solution would be to expand consumer cost-sharing reductions (those “CSRs” Trump just decided not to fund) to people who earn more than 250 percent of the Federal Poverty Level, the current cut off equivalent to $30,150 in individual annual income to people making over 400 percent of the Federal Poverty Level, the current cut off point for premium assistance.

Easing out-of-pocket financial burdens for the middle class — a purported aim of Trump’s administration — could help attract some of the 5.6 million uninsured Americans who earn more than 400 percent of the FPL into the market. By spreading risk and lowering premiums or slowing premium growth, the federal share of premium subsidies, applied to 80 percent of people insured via the marketplaces, would decrease, offsetting increased CSR spending.

Alternatively, policymakers could facilitate private sector approaches to bring more people into the risk pool. Regulators could allow more creative insurance promotions: “Sign up and pay your premiums, and your first $1,000 of health care services are deductible free!” or “Low introductory rate: First year’s premium 25 percent off!”

Promotional offers are common in other industries and could work in health insurance if permitted. Incentives have garnered less consideration in recent debates than policies that explicitly or subtly impose penalties, such as increasing the fines for not having insurance or reducing benefits.

As most parents of small children know, encouraging good behavior is often more effective than discouraging bad behavior.

While Trump’s order may look like a carrot, he’s really offering a stick. Let’s not fall for it.

Deborah Gordon is a senior fellow and Anna Ford is a research assistant at the Harvard Kennedy School Mossavar-Rahmani Center for Business and Government. Follow her on Twitter: @gordondeb.