Two Perspectives of Health Plans with Fewer Mandated Benefits

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Last week, the administration issued a rule allowing access to health plans that don't meet certain requirements of the ACA.

These products—which don't have to offer the comprehensive benefits that ACA plans do—will be available to small businesses and the self-employed. And Mr. Trump is expected next to lift limits on the duration of short-term insurance plans sold to individuals, which also circumvent some ACA rules.

Each state can decide how to regulate these types of insurance plans, which may exclude different types of coverage, including maternity services, outpatient prescription drugs and mental-health care. If the plans have fewer benefits than ACA plans, they will cost less, and if they have a healthier pool of enrollees, their premiums could be sharply lower as well.

Advocates of these plans say they are a welcome change and offer more choice.But supporters of the ACA say that insurance with fewer benefits will come back to bite its buyers, and that drawing healthy people out of the ACA markets will cause premiums to rise further for sick people and others who remain in the system.

The ACA's regime of regulations, penalties, mandates and subsidies has accomplished a remarkable feat: It has produced unaffordable insurance coverage that often doesn't finance care for those who need it most.The federal government should therefore give states flexibility to permit the sale of alternative policies.

Pro: Factors in Favor
By: Doug Badger

Let's start with premiums. A 40-year-old selecting the cheapest possible policy on the ACA marketplaces pays an average annual premium of more than $4,000. For a family of three, premiums for the lowest-priced plans average more than $10,600. The deductible for such coverage averages over $12,000, meaning that the family would have to run up more than $22,000 in medical bills before they broke even on their insurance outlays.

And those are the costs for in-network services. The costs involved in getting out-of-network care have rendered the "essential health benefits" an empty promise for many of the sickest patients. For example, MD Anderson Cancer Center in Houston is not part of any ACA network in Texas. For a patient with an ACA plan to be treated there and have the coverage be considered in-network, he or she must have a referral and convince their plan to grant a one-time exception. Lots of luck.

Getting treated by non-network providers is pretty much indistinguishable from being uninsured. Your ACA policy won't pay a dime. And the thousands—or tens of thousands—of dollars you spend on care won't count toward your deductible or out-of-pocket spending caps.

There should be fewer surprises for purchasers of the short-term plans. The administration's proposed rule requires insurers to include a disclaimer informing consumers that their plan isn't required to cover federal "essential health benefits."

ACA enthusiasts insist that consumers would be harmed if states were allowed to deviate from the fine-sounding benefit package and other regulations written by lobbyists and their friends in the Obama administration.

They fear that if states permit insurers to offer alternatives to ACA policies, many will choose the alternative. It is a telling admission. If ACA policies are as good as their advocates say they are, why do they fear that consumers, given the choice, will flee them?

ACA advocates also believe they must save consumers from themselves by restricting their choices. The ACA coerced state health-insurance regulators into enforcing federal regulations. Intoxicated by their own ideas, the architects argued that regulations that (allegedly) worked in Massachusetts would work in Mississippi and Montana. That has proved false.

Just as misguided is the criticism that the new short-term plans aren't really short term. The rule the Trump administration is considering merely reinstates the regulation that was in effect for 20 years—from 1996 until Jan. 1, 2017—and that defined short-term plans as coverage whose duration was "less than 12 months." No court enjoined that rule.

And let's not characterize short-term plans as unfair because they may appeal to healthy people. ACA policies have always attracted the sick and repelled the healthy, creating unstable risk pools and unaffordable premiums. Giving healthy people the option of affordable coverage will induce some to gain coverage who would otherwise have been uninsured.

The ACA broke the insurance markets. Repairing them will require flexibility and choice—flexibility for states to deviate from the ACA's regulatory scheme and choice for individuals and families to select the coverage that is best for them.

Con: Plans May Entice People Who Will Then Regret It

By: Nicholas Bagley

Health insurance is complicated. In many states, it's about to get worse.Within weeks, the administration is expected to release a rule giving insurers more freedom to sell "short-term" health plans that don't comply with the ACA's key protections. These plans can refuse to cover pre-existing conditions, maternity care, prescription drugs and mental-health treatment. And what if you're diagnosed with cancer? Better hope you don't burn through the dollar caps on coverage.

The impending rule seeks to exploit a loophole exempting "short-term limited duration insurance" from most ACA rules. These short-term rules were meant to fill temporary breaks in coverage, not to substitute for comprehensive insurance.

But the administration wants to define a health plan offering coverage for 364 days in a year as "short-term" insurance. That's a legally dubious move: The courts may not stand for it.

And neither should the states. Even after the rule is adopted, they are free to prohibit sales of short-term plans, as five northeastern states already have done. Failing that, the states can regulate the plans and limit their sale.Where states allow short-term plans without restriction, the plans will be a lot cheaper than those sold on the exchanges because they don't have to comply with the ACA. But that low price comes with big tradeoffs.

Short-term plans don't have to sell to all comers, nor do they have to cover pre-existing conditions. Sick people will have no real choice but to buy insurance on the exchanges. To cover the medical costs of a relatively sicker group of people, exchange insurers will have to increase their premiums.

People who earn less than four times the poverty level are shielded from the price increases because the ACA caps premiums at no more than about 10% of income. The federal government, however, must pay the rest of the tab—so as prices go up, federal outlays will, too, squandering an estimated $38.7 billion over 10 years.

Hurt worst will be people who earn more than four times the poverty level. Federal actuaries estimate that they'll pay 6% more on account of the short-term rule by 2022. That will come on top of price increases associated with Congress's repeal of the individual mandate. In 2019 alone, the Urban Institute predicts that insurance prices will grow, on average, by about 18%.

Beyond that, people who buy short-term plans may be surprised to discover just how stingy they are. Insurance is complicated: people rarely read, much less understand, all the fine print. And there's a lot of fine print.Short-term plans entice consumers by promising access to a wide range of physicians and hospitals. But these plans often cap outlays at $250,000, and virtually no short-term plan pays more than $2 million. Once you exceed coverage limits, the plans won't pay a dime for your medical care.

These plans also have big gaps in coverage. No short-term plan covers maternity care, according to an analysis by the Kaiser Family Foundation. More than two-thirds don't cover prescription drugs, and nearly half don't cover mental-health services.

States that don't restrict the sale of short-term plans will watch idly as their insurance markets deteriorate and their residents learn, to their dismay, that a cheap health plan doesn't cover them when they need it the most.

Sometimes you get what you pay for.

Source: WSJ – Yes: Doug Badger - No:Nicholas Bagley 

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Monday, 16 July 2018