The Department of Health and Human Services finalized a rule change on Wednesday that will allow Americans to purchase short-term health-insurance plans that provide limited coverage at relatively low cost for up to three years.
The rule overturns an Obama-era restriction that limited the use of short-term plans to just three months in an effort to prevent younger, healthier consumers from leaving Obamacare exchanges in favor of less comprehensive coverage at a lower cost.
The new “short-term, limited duration insurance” plans will help those struggling to pay the high premiums increasingly embraced by insurance providers who opt to continue listing plans on Obamacare exchanges rather than leaving the exchanges amid flagging enrollment and spiking costs, as many of their competitors have done.
“There are individuals today who have been priced out of coverage” due to Obamacare, James Parker, a senior adviser to secretary of health and human services Alex Azar, told the New York Times. “Until we have a more comprehensive replacement for the Affordable Care Act and Obamacare, we are looking to do everything we can to take incremental steps that will make insurance coverage of any type more affordable to those who today cannot afford insurance coverage.”
Parker stipulated, however, that the short-term plans do not provide the kind of comprehensive coverage required of plans listed on Obamacare exchanges.
“We make no representation that it’s equivalent coverage. These policies will not necessarily cover the same benefits or extend coverage to the same degree,” he said.
Critics allege the rule change allows insurance providers to offer low quality coverage and does further damage to Obamacare exchanges that are already bereft with astronomical premiums due, in no small part, to the Trump administration’s elimination of the individual mandate and drastic cuts to consumer outreach.
This move, critics say, will further bifurcate the risk pool as the healthy leave more expensive Obamacare-compliant plans in order to save money, leaving the elderly and sick to contend with even higher premiums.
Trump administration officials, however, argue the rule change will not significantly impact Obamacare risk pools. According to their estimates, roughly 600,000 people will purchase short-term plans over the next year before eventually reaching 1.6 million but only 200,000 of that group would have otherwise purchased plans from the exchanges.