The Trump administration is moving today to liberalize the rules for short-term health plans. Those plans were subject to new regulations during the last year of the Obama administration, regulations that shrank the amount of time that such plans could last (from a year to three months) and banned insurers from offering guaranteed renewability. The Department of Health and Human Services is reversing these regulations.
The impact of that reversal will be bigger, though, because of another change in health policy since 2016: the end of Obamacare’s fines on people who go without health insurance that complies with that law’s regulations. Short-term plans are exempt from many of those regulations, which helps to make them cheap. But policyholders were not, for the same reason, exempt from those fines. The Republican tax bill set those fines to zero, however, and so a disincentive to buy the plans will no longer apply.
A senior official at HHS says that 1.5 million people who would not otherwise have health insurance are projected to obtain short-term plans as a result of the new rules.
Two major criticisms of those rules are expected, and have been levied since Trump directed the department to consider them. (They are identical to the criticisms made of the Labor Department’s move, in June, to loosen regulations on association health plans.) The first is that the plans are “junk plans” because they lack Obamacare’s protections. The force of that objection depends on how much one trusts individuals to make decisions about what kind of insurance is best for them. The second criticism is that liberalizing short-term plans will destabilize Obamacare’s exchanges because their healthier participants will seek the newly attractive cheap plans.
The HHS official discounts that possibility because the exchange population is heavily subsidized, and short-term plans will be ineligible for the subsidies. He suggests that short-term plans will be attractive to a different group: those who make a little too much money to qualify for subsidies. The new rules don’t undermine Obamacare, that is, so much as they patch one of its holes.