Latest posts by Charles Katebi (see all)
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Over the past four years, the cost of individual health insurance has more than doubled under the Affordable Care Act, commonly known as Obamacare. But on Tuesday, the Department of Health and Human Services (HHS) proposed new rules to offer consumers an expanded array of affordable health coverage options.
The newly proposed rules would extend the allowable duration of health plans known as short-term insurance from three months to 12 months.
Prior to the Obama administration, individuals typically purchased these limited-duration policies to stay covered as they transitioned from one plan to another, but in recent years, individuals flocked to purchase these health insurance plans because they are low-cost alternatives to ObamaCare’s increasingly unaffordable model.
HHS Secretary Alex Azar promises the new rule will help more Americans find the right coverage that fits their personal medical needs. “The status quo is failing too many Americans, who face skyrocketing costs and fewer and fewer choices,” said Azar. “The Trump administration is taking action so individuals and families have access to quality, affordable healthcare that works for them.”
These changes are the latest moves by the Trump administration to rein in the growing cost of health care.
Following Congress’ failure to repeal and replace ObamaCare, the president issued an executive order instructing various government agencies to expand affordable health coverage options beyond ObamaCare’s dwindling choices.
In January, the Department of Labor proposed allowing small business to band together and purchase health insurance for employees through association health plans. The Congressional Budget Office estimates AHPs could reduce the cost of coverage as much as 25 percent and expand insurance to an additional five million people.
The changes detailed in Azar’s latest proposal would similarly expand consumer options in the individual market.
Democratic Party leaders predictably warned Azar’s proposal will hurt patients by exposing them to short-term plans that don’t comply with ObamaCare’s insurance regulations. Senate Minority Leader Chuck Schumer (D-N.Y.) claimed such policies are “junk insurance.”
Nothing could be further from the truth. Expanded short-term plans could potentially make the American individual health insurance market more robust and better suited to the needs of consumers.
Many consumers can’t or won’t use many of the services required to be included in all ObamaCare-compliant health insurance policies. Numerous other Americans are stuck with health insurance policies that have such high deductibles that they won’t ever be able to afford using them. And those issues only apply the consumers who can actually afford to purchase an ObamaCare plan.
The number-one reason why nearly 28 million individuals remain uninsured is because ObamaCare regulations make health insurance unaffordable. The law requires every health plan to cover a range of expensive and often unnecessary services, such as maternity care, pediatric services, and substance abuse treatments.
In addition, insurers are prohibited from charging healthy and young consumers less than older and sicker ones. As a result, the cost of health insurance has skyrocketed. An actuarial study by the consulting firm, Mckinsey & Company estimates that Obamacare’s regulations were responsible for 41 percent to 76 percent of premium increases in the individual market between 2013 and 2017.
And despite ObamaCare’s promises to expand coverage, its high premiums winded up increasing the ranks of the uninsured in 2017, according to a report from Gallup.
The polling company found that the uninsured rate for young people aged 18–34 increased nearly 10 percent between 2016 and 2017. The scarcity of healthy enrollees has made it much harder for insurers to sell coverage and forced many to exit the market entirely.
Fortunately, Azar’s expanded short-term policies will allow consumers to purchase truly affordable coverage. Because ObamaCare’s rules mandating benefits, prices, or lifetime limits don’t apply to short-term plans, insurers will finally be able to offer young and healthy individuals low-cost insurance that covers major catastrophic events.
This is why the average individual can purchase short-term insurance for just $124 a month, which costs less than one-third of the price of the average plans on Healthcare.gov.
Contrary to the doomsayers, these affordable options won’t destabilize insurance markets. Experts at HHS estimate only 100,000 to 200,000 individuals currently on ObamaCare’s exchanges will drop their coverage and sign-up for short-term insurance.
The vast majority of the customers lining up to buy these new policies will likely be among the tens of millions of individuals who cannot afford ObamaCare’s sky-high premiums and are currently uninsured.
This new proposal is by no means a silver bullet. Even though short-term plans will finally offer working families an affordable option, federal law still prohibits them from renewing their policies when the period is up.
That means if you have a short-term plan and get sick with a very serious illness, such as cancer, the insurer can choose not to cover you once your policy term ends. At that time, you’d have to enter the ObamaCare exchange and buy a standard, more expensive health insurance policy.
However, despite that flaw, for the first time in years millions of Americans priced out of insurance by ObamaCare will finally be able to afford quality health insurance. That’s something worth celebrating.
[Originally Published at The Hill]