Biden Takes Aim at Popular Short-Term Health-Care Plans

P resident Biden is poised to take health coverage away from millions of people, per a report yesterday by Politico. His administration is deriding these plans as “junk” because they are free from federal mandates for what insurance must cover and free from restrictions on how insurance must be priced. The reality: These plans, dubbed short-term plans, are not subject to Obamacare rules and are thus much more affordable and flexible for families.

In 2018, the Trump administration permitted people to have a short-term plan for up to 36 months, subject to state regulations. This new rule saved families money on health insurance, increased access to health care, and reduced the number of the uninsured. It also did not harm the Obamacare markets. Reports suggest that the Biden administration will reverse this progress and restrict short-term plans to just a three-month duration. Doing this will reduce the benefit families receive from short-term plans, harm people who get sick, and increase the number of people without health insurance.

According to a study by Chris Pope at the Manhattan Institute, short-term plans “cover a significantly larger share of medical costs than [Obamacare] plans for the same premiums.” Having had both a short-term plan and an Obamacare plan since moving to Florida, I can confirm that short-term plans cover far more doctors and hospitals than Obamacare plans do.

An estimated 3 million people enrolled in short-term plans in 2019. The expansion of short-term plans reduced the number of uninsured people, with projections ranging from 200,000 to 3.7 million fewer uninsured.

Short-term plans help middle-income families who don’t qualify for massive subsidies for Obamacare plans. In fact, up to 90 percent of people purchasing Obamacare plans in the exchanges receive subsidies, and many people, particularly younger families in a middle-income bracket, simply cannot afford these plans because they don’t qualify for subsidies.

If President Biden’s proposal restricts the time that people can have short-term plans, the primary victims will be those who get sick while covered. They will be forced to go without insurance since Obamacare limits sign-ups for Obamacare plans to just a few weeks each year.

In a 2021 study, I investigated whether short-term plans harmed the Obamacare markets. They do not. I found that states which fully permitted short-term plans had more favorable trends in enrollment and premiums, and they had more insurer participation in the exchanges than states that restricted short-term plans. From the piece:

The 2018 short-term plan rule may have, in fact, helped improve the individual market. This could have occurred because short-term plans forced insurers selling [Obamacare]-compliant products to offer more attractive products because of the added competition and because people with short-term plans who got sick or injured had short-term plans pay their expenses instead of moving to the individual market to get coverage to pay their expenses.

People spend their own money on short-term plans, so they have an incentive to ensure they get good value from the coverage. On the other hand, the average subsidy now covers about 85 percent of the premium for the average Obamacare enrollee’s plan. It’s ironic that plans that people self-finance are derided as junk while plans that people buy only if taxpayers cover nearly the entire premium are viewed as the gold standard.

President Biden assured Americans during his presidential campaign, “If you have private insurance, you can keep it.” Unfortunately for the millions who currently have short-term plans as well as people who would benefit from them in the future, the Biden administration is poised to violate that campaign promise, severely restrict a good coverage option that costs taxpayers nothing, increase the number of Americans without health insurance, and potentially harm the Obamacare exchanges.