Kaiser, AHIP warn against the repercussions of short-term health plans

Many short-term health plans did not provide coverage for benefits that are required for Obamacare plans, such as mental health and substance abuse.

Forty-three percent of short-term plans examined don’t include mental health coverage, while 62 percent don’t cover substance abuse treatment and 71 percent don’t cover outpatient prescription drugs. (Photo: Shutterstock)

A liberal-leaning nonprofit and the nation’s largest health insurance lobby are both raising concerns about the effects that short-term health plans are having on the American insurance market.

In an analysis of short-term health plans offered through two major online insurance marketplaces, the Kaiser Family Foundation found that many of the plans did not provide coverage for benefits that are required for Obamacare plans.

Forty-three percent of plans don’t include mental health coverage, while 62 percent don’t cover substance abuse treatment and 71 percent don’t cover outpatient prescription drugs.

The skinny plans are of course cheaper than their more comprehensive competitors. “(I)t is not uncommon to find the cheapest short-term policy priced at 20 percent or less of the premium for the lowest cost ACA-compliant bronze plan in an area,” says the report.

Related: Premiums, uninsured rate going up under Trump admin ACA changes

Although short-term plans have existed for years, their appeal during the Obama administration was limited by the fact that those who bought them were also forced to pay the annual penalty for not having an ACA-compliant plan. In another attempt to dissuade consumers for opting for what was considered sub-standard coverage, the Obama administration issued a rule barring short-term plan contracts longer than three months.

The Trump administration has instead sought to encourage such plans. The most critical action was the repeal of the individual insurance mandate in last year’s tax bill, which eliminates one of the incentives to choose a comprehensive plan over a skinny plan. More recently, the administration has proposed extending the maximum life of a policy to 12 months.

The Kaiser report warns of price increases for those in the ACA marketplace if a significant number of people start opting for short-term plans.

“The combined effect of repealing the individual mandate penalty and the administration’s efforts to promote the sale of short-term plans could result in fewer people signing up for ACA-compliant plans and higher premiums in the ACA-compliant individual market, potentially adversely affecting the stability of the ACA-compliant individual market,” write the authors.

Major health insurers are gearing up to fight the proposed new rule, saying that it could undermine the mainstream insurance market by luring healthy, young people out of the risk pool for more comprehensive plans.

“Short-term plans can provide an important temporary bridge for Americans who are transitioning between plans. But they are not a replacement for comprehensive coverage,” said Matt Eyles, president of America’s Health Insurance Plans. “We urge the Administration to limit the duration of short-term plans to six months, ensure clear disclosures to consumers about what short term plans do and do not cover, and inform consumers of the potential availability of discounted coverage through the marketplace.”