Health Premiums – What Factors Have an Impact?

According to the AARP, on February 21 this year, the Trump Administration proposed a new set of Federal Rules which would mean the expansion of a type of health insurance product called short-term limited duration insurance plans. These new rules mean that older Americans who have insurance through the Affordable Care Act (ACA) will have to pay an average of $2000 more in 2019 health premiums.

What are Short Term Limited Duration Health Plans?

Also called Short Term Plans, these policies are meant to provide medical health coverage for a limited period of time to people who currently don’t have a fully-fledged health insurance policy, such as those who are between jobs or students taking a semester off from college. The challenge with short term plans is that they are extremely limited in many ways. Many important ACA protections are not afforded under these policies. People with pre-existing conditions cannot qualify for these short terms plans. Basically, only healthy people are allowed to purchase short term medical plans. Additionally, such plans do not cover essential benefits such as mental health or prescription drugs. These plans can also impose yearly as well as lifetime limits on coverage. Additionally, the Trump administration has proposed that the mandate in the ACA that says people need to have health insurance that provides at least minimum essen tial coverage (individual mandate) be scrapped.

Challenges with the New Rules Proposed

Federal officials state that these new rules is to provide more affordable coverage options to a larger number of Americans, it is actually not the case. Here is a list of reasons why.

• Time Limit Increase

The plans had a federal limit of 3 months and could not be renewed beyond that time. The reason for this was that it was revealed that health insurance companies were abusing the benefits of these plans. Now, the rules proposed as a result of President Trump’s Executive Order mean that this time period gets extended to 1 year (364 days, to be exact). This change makes them almost identical in terms of time to plans that are required to comply with the ACA. With the removal of the individual mandate clause, insurance companies will be able to abuse the “short term plan”.

• Older Americans and people with pre-existing conditions will suffer

Since short term plans are actually targeting healthy people, older Americans and people with pre-existing conditions will suffer. More than 40% of older Americans between the age of 50 and 64 already have pre-existing health conditions. Short terms plans do not need to comply with age rating protections imposed by the ACA. This means that insurance companies are free to charge older people more than 3 times the health premium they charge other people. In fact, older people can even be denied such coverage on the basis of their age. 

• Short Term Plans will drive up Health Premiums

The expansion of these plans will push up health premiums for everyone. Healthy people will end up opting for short term health plans since they are cheaper, which means that those who are left in the individual health insurance segment – the people who really need health insurance coverage – will have to pay that much more in health premiums. If these new federal rules are imposed, then health premiums will see an average increase of 16.6% in 2019. And in some states, that number could be as high as 22%. The proposed rules could lead to the creation of a secondary non-ACA market, which would be a regression for the country in terms of health coverage for Americans.