Today, following the instructions of a Trump order from last fall, three executive agencies released a proposal to allow greater use of “short-term, limited-duration” individual health plans. It could prove to be either a small tweak or a substantial blow to Obamacare.
These plans, generally intended for situations where someone is temporarily without other options (e.g., in between jobs), are currently limited to three months and don’t count as coverage for purposes of the individual mandate. The mandate is already set to end after 2018, though, and now the administration wants to allow short-term plans that last for up to a year as well. The proposed rule even asks for comment about the possibility of making them renewable.
The upside of short-term insurance is that it is a cheap option for healthy people, free from many of Obamacare’s rules. As Dylan Scott succinctly puts it, “Plans can deny people insurance based on their medical history, charge them higher premiums because of their preexisting medical conditions, and craft skimpy benefits packages that will appeal mostly to young and healthy people.” A short-term plan costs only about a third as much, per month, as an Obamacare-compliant one.
Which hints at the downside: If the healthy leave Obamacare for short-term plans in significant numbers — which no one can really predict — the folks left behind will be disproportionately sick, and premiums will rise. When premiums rise, subsidies for low-income enrollees automatically rise too, meaning taxpayers will get some of the bill. Those who buy comprehensive plans but don’t qualify for subsidies, who are already struggling the most under Obamacare, will be hardest hit.
It’s a frustrating tradeoff, similar to the one inherent in repealing the individual mandate, but one that can be avoided only by wholesale changes to the law’s structure, which the GOP has thus far failed to enact.
There are some lessons for the Left here, too. First, this is what happens when you give the executive branch broad discretion to make policy. Second, federalism is a beautiful thing when the other side controls the national government: States that like the old system are free to regulate short-term plans themselves.