Last Wednesday, Health and Human Services Secretary Alex Azar announced a finalized rule granting consumers greater access to affordable health insurance policies. Under the new rule, people will be allowed to purchase short-term, limited-duration health insurance plans for periods as long as 12 months. Currently, the maximum period allowed is only three months. Plans can be renewed after the 12-month period, but they cannot extend beyond 36 months.
Short-term health insurance plans are significantly cheaper than most Obamacare plans because they don’t include many of the costly essential health benefits mandated under federal law and because they are sold for a limited duration. These plans do not provide comprehensive coverage, but they are an excellent option for people who are relatively healthy but can’t afford to pay for an outrageously priced Obamacare plan.
Fueled by massive regulatory burdens and limited market competition, the cost of purchasing and using an Obamacare health insurance plan has skyrocketed in recent years. According to an analysis by Health Pocket, the average monthly premium for a 30-year-old purchasing a mid-level Silver Plan in 2018 is $477, up 31 percent from just one year prior. The average 60-year-old must pay $1,139 per month, a figure that’s also 31 percent higher compared to 2017.
Premiums are not the most important cost to consider, however, because some people who purchase health plans through an Obamacare exchange receive large subsidies to help offset their plan’s high premiums. A much more important factor is the high cost of deductibles and other out-of-pocket costs. The average family enrolled in a Silver Plan will pay a maximum of $13,725 for out-of-pocket expenses, with Silver Plan deductibles increasing by 13 percent in just the past year alone.
Working families can’t afford to pay more than $13,000 to cover out-of-pocket expenses. In fact, health insurance this expensive is virtually useless.
The high costs associated with an Obamacare plan are a big reason why the Centers for Medicare and Medicaid Services predicts about 600,000 Americans will sign up for a new short-term health insurance plan next year. By 2022, CMS expects 1.6 million to be enrolled in a short-term plan.
Although short-term plans also include high deductibles, their premiums are much lower. According to the Department of Health and Human Services, the average premium of a short-term plan in the fourth quarter of 2016 was only $124. Even if this price were to increase because of the rule change allowing plans to be for 12-month terms, it will still be much less money than the cost of an Obamacare plan, making it a better option for millions of consumers, especially younger Americans.
Critics of the rule change say short-term plans are lower-quality and should be avoided because they don’t include all the essential health benefits mandated to be included in every single Obamacare plan. But for millions of people those mandates do nothing more than drive the cost of health insurance up without providing any real advantages. Many people don’t need to have maternity care covered, for example, but essential health mandates require insurers to cover maternity care in every Obamacare plan. Similarly, most people will never use mental health services, even though they are required to pay higher premiums and deductibles so that these services can be included in their Obamacare coverage.
Others say short-term plans should be avoided because insurers can choose not to renew a plan once the term expires, which means a person who develops a serious health condition, such as cancer, could lose his or her health insurance coverage when a 12-month plan’s period ends. However, this, too, is not a good argument, because Obamacare plans must accept all people applying for coverage, regardless of a pre-existing condition. That means a person who develops cancer while enrolled in a short-term plan and then loses coverage could easily obtain a new health insurance plan in an Obamacare exchange.
The healthcare system is failing, and has been for decades. Despite the promises made by former President Barack Obama and the congressional Democrats who passed Obamacare into law, the legislation has only made things worse. Congress needs to pass a bill to repeal and replace Obamacare. But since that has yet to occur, the Trump administration is doing everything it can to help young people and working families gain affordable coverage. It’s great to finally have a presidential administration that’s truly committed to reducing health insurance costs rather than appeasing far-left activists in the Democratic Party.
Justin Haskins (@JustinTHaskins) is a contributor to the Washington Examiner’s Beltway Confidential blog. He is an executive editor at The Heartland Institute.
