Limiting short-term health plans will limit patient and broker choice

The Biden administration could soon finalize a rule that strips millions of Americans of health insurance plans they like — and makes it more difficult for brokers to offer the affordable coverage options that so many people need. 

That's not the president's pitch, of course. He claims the rule, which would limit the duration of short-term health plans, is necessary to protect unsuspecting Americans from rapacious brokers trying to "sucker" them into purchasing "junk" insurance that doesn't actually protect them if they get sick. 

But short-term plans aren't junk, nor do they sabotage enrollees. They're a sensible choice for many consumers. And because they're considerably less expensive than plans offered through Affordable Care Act (ACA) exchanges, they're often the only financially viable option for people who'd otherwise go uninsured. Limiting their availability does a disservice to ordinary Americans —  and the brokers working to assist them.

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Short-term plans aren't subject to ACA's stringent mandates,  like the requirements that plans cover 10 expensive essential health benefits, many of which are not wanted by consumers.Insurers also can medically underwrite short-term plans, meaning they can charge individuals with pre-existing conditions market prices rather than being compelled to overcharge healthy individuals in order to subsidize coverage for people who are already sick. 

As a result, short-term plans are much more affordable than plans on the exchanges. The typical benchmark exchange plan, for instance, costs $456 each month. And even if enrollees are receiving government subsidies to help pay for their premiums, many still have to pay their deductible — which, depending on the plan, can exceed $9,000 — before their coverage kicks in.

Meanwhile, the average mid-tier, short-term health plan costs roughly $200 per month and has a $5,000 deductible. Some premiums are even cheaper, costing as little as $10 each month.  

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Therein lies the problem, according to President Biden. He claims that short-term plans' attractive sticker prices have tricked roughly 3 million Americans into buying insurance that might not cover the services they need, leaving them with thousands of dollars in unforeseen medical bills. To rectify the situation, the Biden administration's rule would limit the duration of short-term health plans to no more than four months. Under current law, which became effective in 2018 under former President Donald Trump, consumers can buy short-term plans that last nearly a year (364 days) and renew them for up to three years. The proposed change by the Biden administration would significantly limit the health insurance choices of patients and brokers.

Americans routinely make consequential financial decisions, from buying a home to investing in the stock market. And, for the most part, regulators trust them to do their own research before doing so. Buying health insurance should be no different. 

After exploring his options, a young and healthy man might decide he doesn't need the comprehensive coverage for maternity care or substance abuse treatment offered on the exchanges and mandated under the ACA. It might make far more sense for him to choose an affordable short-term plan than to shell out thousands paying for coverage he'll likely never use or want. 

And he wouldn't be alone. Roughly 80% of short-term health plan enrollees say that affordable premiums are more important to them than comprehensive health benefits. 

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Some might not even have to make that tradeoff. Research from the Manhattan Institute reveals that many short-term plans cover a similar range of services and have wider provider networks than ACA plans, all at a lower cost. Even a 60-year-old smoker might be able to find a short-term plan for less than an exchange plan. 

Insurance brokers understand this well. That's why a handful have responded to the proposed rule urging the Biden administration to reconsider. 

For some of their clients, especially those who don't qualify for ACA subsidies, short-term plans might be one of the only affordable health insurance option available. Those scenarios include employees who face a lengthy probationary period at their job, work at a small business that doesn't offer insurance, or work part-time and are ineligible for employer-sponsored coverage. Limiting them would all but prohibit brokers from helping clients enroll in the plan that's truly best for them.  

Other brokers have warned that, under the proposed rule, some of their clients would simply go uninsured after their short-term plans expire. 

If an individual signs up for a short-term plan in January, gets sick, and then loses insurance in April, for instance, he or she might not be able to find another source of coverage until the ACA's open-enrollment period opens later that year for coverage the next year. For eight months, he or she likely wouldn't have coverage at all — a catastrophe far worse than being enrolled in a short-term plan.

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Indeed, estimates suggest that between 500,000 and 2 million people could become uninsured as a result of stricter regulations on short-term plans. Let's hope those presenting the truth are heard during the 60-day comment period. 

President Biden has long vowed to reduce the number of uninsured Americans. His proposed rule would do the exact opposite, all while severely limiting the number of affordable insurance options available to patients and brokers.