by Josh Archambault and Beverly Gossage
Mike Pirner had emergency gall bladder surgery shortly after buying short-term medical insurance plan (STM), for $150/month. The costs associated with the procedure were $100,000 — Mike only had to pay his $2,500 deductible, which was also his out-of-pocket maximum. President Biden has proposed rules released Friday of the July 4th week that would limit these plans to three months, with one additional month possible. Currently, these plans can last up to three years.
This would have a significant impact on many Americans. For example, if Mike had been on a standard Affordable Care Act (ACA)/ObamaCare plan he would have paid an $8,550 deductible for the surgery, assuming his plan covered that facility.
Before purchasing a short-term plan, Pirner had researched ObamaCare plans, and found the cost of the “closest match” to a short-term plan was north of $500/month. This meant the annual combined out-of-pocket costs plus the premium for an ACA plan would be near $15,000 — compared to well under $5,000 for his short-term plan.
For the middle-class Americans we know that have utilized STMs, four months will not be adequate, and many will go uninsured as a result, and there will be negative impacts for anyone buying insurance on their own.
“An Obamacare plan was simply not an option,” he says, “For a time, I considered having no insurance at all, until I realized short-term plans made sense for my situation.” As President Biden looks to limit STMs, it will have a real impact on millions of Americans.
In the past, when questioned by Congress, U.S. Department of Health and Human Services Secretary (HHS) Beccera acknowledged that short-term plans have a role in the ACA, and that he wants to ensure Americans have choice and affordability. These are the exact principles that will be undermined by the new proposal from HHS.
If STMs are shortened those on a short-term plan would see their deductibles reset more often, forcing them to pay far more out-of-pocket. For those who get sick when on the plan, they will lose the certainty of coverage for up to three years, and would be forced to reapply every few months. With shortened plan times, the government may be forcing sick patients to be uninsured until the next open enrollment for Obamacare plans.
For working single mothers like Desiree, who is trying to raise two kids and unable to afford the Obamacare plans without a subsidy, these proposed changes would mean losing the peace of mind of yearlong coverage for her kids and herself as she figures out how best to get her feet under her.
For years critics have said that short-term plans will hurt the individual Obamacare insurance markets. Yet reality and data now show otherwise.
Roughly half of states currently allow short-term plans to last up to three years, and half restrict or ban them. So what will President Biden’s rules mean in the half of states that have more flexible rules.
Research by former White House staffer Brian Blase has shown that, pre-COVID, Obamacare enrollment drops were less in robust STM states versus restrictive states. Critics that predicted many would leave the Obamacare market under STMs, were just wrong.
Robust STM states saw a 40 percent higher increase in new Obamacare insurers entering the individual market, and premiums were lower in robust STM states. The only group of states where Obamacare individual market rates increased during that time were the five states that ban STMs.
Finally, states that restrict short-term plans create the unintended consequence of plans with fewer benefits. For example, mental health services are 50 percent less likely to be covered in restrictive states.
Turns out, the individual market is strengthened when STM plans pay for surgeries like Mike’s that otherwise might have fallen on an Obamacare plan, or resulted in uncompensated care. STM plans make the market more competitive.
The President’s efforts to limit short-term plans will not only harm folks like Julie who is waiting for coverage to kick in at her new employer, and Deann who retired at 63.5 but needs a plan until Medicare kicks in at 65, but also the tens of millions of individuals that buy insurance on their own.
Short-term plans are not for everyone, and they are not limited benefit plans as is often confused by critics, but instead, they can be a lifesaver. Mike, Julie, and Deann, and a million others, may be uninsured as a result of the President’s proposed rules; and he will violate his campaign promise that he would not repeat the past mistake of taking away private insurance options.
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Josh Archambault is President of Presidents Lane Consulting and a senior fellow at Cicero Institute and State Policy Network, Sen. Beverly Gossage represents District 9 in the Kansas State Senate and is a health insurance broker.
