Short-term plan expansion will hike individual market premiums, lower enrollment
The Trump administration's plan to expand short-term limited duration insurance (STLDI) plans will cause higher individual insurance premiums as healthy people flee the Affordable Care Act (ACA) exchanges for the lower-cost short-term plans, according to a new Wakely Consulting Group report.
Wakely said the change will have long-term effects on the individual market. The report estimated that STLDI plan expansion will increase premiums in the individual market by 0.7% to 1.4% and decrease enrollment by 2.7% to 5.4% in the first year.
Once the expanded short-term market takes hold, individual plan premiums will be 2.2% to 6.6% higher and enrollment will drop by 8.2% to 15%. Combining the expansion of the short-term market with the individual mandate penalty repeal, Wakely predicted higher premiums in the individual market of between 10.8% and 12.8% and decreased enrollment from 20.9% to 26.3% in the near term.
The report was prepared for the Association for Community Affiliated Plans (ACAP), which is a group of nonprofit safety net health plans that provide coverage in the individual market, Medicare and Medicaid.
Wakely said expanding short-term plans "has the potential to increase market instability, market segmentation and adverse selection in the ACA-compliant individual market because a substantial number of healthy members will likely migrate to STLDI plans."
In an attempt to limit damage to the individual market, the Obama administration limited short-term catastrophic plan enrollment to only three consecutive months. However, the Trump administration is looking to reverse that regulation, expand short-term plans to a year and let anyone join a catastrophic plan rather than limiting them to only young people or those who can’t afford a regular health insurance plan.
Though the Trump administration’s move will open up cheaper insurance to more people, Wakely warned that premiums will increase for those left in the individual market. The short-term insurance plans, coupled with the end of the individual mandate penalty in 2019, are expected to “increase the morbidity of the risk pool” in the individual market, Wakely said.
While payers await further word from the administration about final decisions on short-term plans and association health plans, some states are already attempting to bring non-ACA-compliant plans to the market. CMS declined an Idaho proposal last month to allow the sale of plans that don’t comply with the ACA. Blue Cross of Idaho had planned to sell five such health plans.
Though CMS has been outspoken in its opposition of the ACA, the agency said it still needs to enforce the law. While rejecting Idaho, CMS Administrator Seema Verma suggested the state could still achieve many of its goals through short-term catastrophic plans.
The CMS also earlier this week issued a final rule that gives states flexibility in selecting what they consider essential health benefits under the ACA. Currently, the ACA requires 10 essential health benefits, including pharmacy, outpatient and maternity coverage. In the new proposal, states would decide on their own set of benefits.
- Association for Community Affiliated Plans Effects of Short-Term Limited Duration Plans on the ACA-Compliant Individual Market