Debate on Obamacare Premiums Erupts

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By Sara Hansard

Will a Trump administration proposal making it easier for people to buy cheaper health plans that don’t comply with Obamacare rules drive up premiums?

The Department of Health and Human Services downplays that possibility. Based on projections from independent actuaries, “only a very small number of healthy people"—between 100,000 to 200,000—will shift from the individual market to short-term limited duration plans by 2019, Centers for Medicare & Medicaid Services Administrator Seema Verma said in a press call announcing the proposed rule Feb. 20. “This shift will have virtually no impact on the individual market premiums,” she said.

The impact of allowing the skimpier plans to be sold for up to a year is a major issue. If the plans pull many young, healthy people away from plans that comply with the Affordable Care Act, that could raise premiums further for people remaining in that market.

Executive Order

The proposal follows up on a 2017 executive order from President Donald Trump. The plans don’t have to meet the Affordable Care Act’s consumer protections or offer a robust benefit package. Until 2016, when the Obama administration shortened the time period to less than three months, such plans could be sold for up to a year. The proposal (RIN:0938-AT48) was issued by the departments of Health and Human Services, Labor, Treasury. Comments are due April 23.

The HHS should be able to finalize a rule in “mid- to late spring,” HHS Secretary Alex Azar told reporters at a briefing at the agency’s headquarters Feb. 20.

“The Affordable Care Act, we do not believe, is delivering for people,” Azar said. Insurance premiums doubled from 2013 through 2017, and 50 percent of counties, covering 30 percent of Americans, have only one plan, he said.

Premium Differences

“We believe this can be a meaningful option, an alternative to Affordable Care plans, for the right individuals,” Azar said. Premiums for short-term plans in the fourth quarter of 2016 averaged $124 a month, compared with an average of $393 a month for unsubsidized ACA-compliant plans, he said.

The plans would be subject to the Health Insurance Portability and Accountability Act, as well as to state insurance law requirements, but not subject to ACA requirements, Azar said.

The administration is targeting at least some of the 28 million people who are uninsured, who may choose the short-term plans because they are more affordable, Verma said.

Penalties Paid

In 2015, 6.7 million people paid the ACA’s individual mandate penalty instead of buying insurance, Verma said. The individual mandate penalty will be ended as of 2019 under the Tax Cuts and Jobs Act. “For the millions of Americans who now find themselves priced out of the individual market, this proposed rule provides new options for affordable coverage,” she said.

The National Association of Insurance Commissioners opposed the Obama administration’s 2016 action shortening the plans, Verma noted. In 2016, about 160,000 people were covered by the plans, which brought in premiums of some $146 million, according to an NAIC report.

Insurers selling the plans would be required to provide prominent information notifying consumers that the policies are not required to comply with the ACA, Verma said.

The CMS is also asking for comments on renewing the plans beyond 12 months, Verma said.

ACA Supporters Disagree

Groups that support the ACA disputed the HHS analysis. The proposed rule, if finalized, “will drive up premiums in the marketplaces,” Dania Palanker, an assistant research professor with Georgetown University’s Center on Health Insurance Reforms, told Bloomberg Law Feb. 20.

“Particularly without an individual mandate keeping people in ACA-compliant plans, expanding the short-term market will really siphon healthy people out of the individual market,” Palanker said. As healthy people leave the individual market, those staying in “will find it harder to afford health insurance.”

“This rule is going to effectively make more people uninsured,” Palanker said.

Short-Term Health Plan Seller

But Bruce Telkamp, chief executive officer and founder of AgileHealthInsurance.com, which sells non-ACA-compliant plans, told Bloomberg Law Feb. 20 that “the primary reason why consumers purchase these plans has been that they’ve lost employer sponsored coverage.”

AgileHealthInsurance issued a report on the short-term plans Feb. 20.

“It’s been a myth that consumers are purchasing these plans in lieu of long-term coverage,” Telkamp said.

People need to be able to purchase the coverage for longer than three months, Telkamp said. The average period of unemployment is six months, he said. “The three-month rule harmed a lot of consumers.”

For people who need coverage to fill the gap between jobs, “this is what they can afford,” Telkamp said.

To contact the reporter on this story: Sara Hansard in Washington at shansard@bloomberglaw.com

To contact the editor responsible for this story: Brian Broderick at bbroderick@bloomberglaw.com

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