Congressional Democrats and the Biden administration appear to be laying the groundwork to take health coverage away from millions of people. Next week, House Democrats are holding a hearing on programs by the Trump administration that expanded valuable options for health coverage. Restricting private options would be inconsistent with assurances from President Biden, who promised Americans during the campaign that “If you have private insurance, you can keep it.
This would be a repeat from last decade. After millions of people lost their coverage because the Affordable Care Act made their insurance illegal, PolitFact labeled President Obama’s assurance that people could keep their plans as 2013’s “Lie of the Year.”
At issue now are plans used by more than three million people in 2019. These policies, dubbed short-term plans, are not subject to the ACA’s mandates, and they help people who need more affordable and flexible coverage, such as middle-income families that lack employer coverage or workers in the gig economy.
Some Democrats call these “junk plans.” They aren’t. In addition to covering hospitalization, emergency care and doctors’ visits, many short-term plans also cover prescription drugs and mental health services. These plans pay providers better than ACA plans, so short-term plan enrollees have access to far more doctors and hospitals.
Unlike the ACA, people can sign up for short-term plans anytime, often with coverage starting the next day. Chris Pope of the Manhattan Institute found that for equal insurance protection, premiums for short-term plans are much lower – and in some cases half the cost – of ACA plan premiums. While the Obama administration restricted short-term coverage to just three months, a 2018 federal rule change permits people to maintain these plans for up to three years.
Many opponents of consumer choice in health care warned that expanding short-term plans would devastate the ACA market, where many people without employer coverage or a government plan shop for insurance.
Senate Majority Leader Chuck Schumer (D-N.Y.) remarked that encouraging short-term plans “will send costs soaring for older Americans and those with preexisting conditions and add further chaos to the markets.” Some “expressed deep fears that as a result of this rule, they would lose coverage because issuers would stop offering individual market plans or because those plans would become too expensive.” Just last month, a Journal of the American Medical Association editorial advised reversing the 2018 rule, claiming that expanded short-term plans make ACA plans less affordable.
We have enough experience to test these claims with actual data. Roughly half of states fully permit short-term plans and roughly half of states place restrictions on short-term plans, with a few banning them altogether.
My analysis shows that states that expanded short-term plans may have helped improve the individual health insurance market. States that do not restrict short-term plans had better enrollment trends, greater insurer participation and lower premium trends in their individual markets since 2018 than states that restrict these plans.
The number of insurers offering ACA plans increased by 61 percent from 2018 to 2021 in states that fully permit short-term plans versus just 25 percent in states that restrict short-term plans. Individual market enrollment trends were also better in states that fully permit short-term plans.
And while individual market premiums have declined since 2018, the decline has been more than twice as large in states that fully permit short-term plans. The only states where individual market premiums have gone up since 2018 are the five states –California, Massachusetts, New Jersey, New York and Rhode Island – that ban short-term plans.
The evidence shows the benefit to states that fully allowed short-term plans, as permitted under the new rule. They bring greater competition to the market, spurring individual market insurers to become more efficient. There also is less adverse selection in the individual market if people who develop medical conditions while enrolled in short-term policies can maintain that coverage for longer. Their short-term plan pays their medical expenses, rather than being forced to switch to an ACA plan.
President Biden should honor his promise and not take private health coverage away from the more than three million Americans who purchase short-term plans each year. There is never a good reason to take away options from people who are spending their own money to buy coverage that works best for them. There is no evidence that permitting short-term plans harms the ACA market; in fact, they might improve them. Either legislative or administrative action to take away this option would harm millions of people and violate an unequivocal assurance from President Biden to protect private health coverage options.
Brian Blase was a special assistant to President Trump at the National Economic Council, 2017-19. He is president of Blase Policy Strategies.