Expansion of short-term plans has worked better than predicted: Study
According to the findings, premiums in the individual market dropped more in states that fully expanded short-term insurance than those that did not.
A new study from the Galen Institute finds evidence that allowing Americans to enroll in short-term health insurance plans has not had the negative outcomes that some health industry insiders predicted. The new report, “Individual Health Insurance Markets Improving in States that Fully Permit Short-Term Plans,” provides data to support that claim. The report comes at a time when the Biden administration has been reversing many regulatory changes put in place during President Trump’s years in office.
Related: Short-term health plans had a great year in 2019 The report was authored by Brian Blase, Ph.D., who was a top health policy advisor to President Trump from 2017 to 2019.
The controversy over short-term plans
The study notes the political context of its findings: the decision to expand short-term plans had been a controversial one, and many supporters of the Affordable Care Act (ACA) saw it as a way of getting around the ACA’s requirement for covering essential benefits. Since short-term plans do not have to cover the ACA’s 10 essential benefits, they can be marketed at lower premiums. Under Obama Administration rules, short-term insurance plans had enrollment limited to three months, and were non-renewable. In 2018, the Trump administration expanded the availability of short-term plans, allowing coverage to last up to 364 days, with renewals of up to three years. Some in the health care industry saw this as another attempt to undermine the ACA, which Republicans had unsuccessfully tried to repeal in 2017. “Critics of short-term plans, and of the 2018 rule, argue that the plans would lead to greater adverse selection in the individual market as some relatively healthy people drop more expensive individual market plans and replace them with more affordable short- term plans,” the Galen study noted. “They have warned that the 2018 rule would lead to fewer individual market enrollees, fewer insurers offering individual market plans, and higher premiums for individual market plans.”
A different result
The Galen report argues that the data does not support those gloomy predictions. Specifically, it uses data from the last three years to counter criticism of short-term plans by showing results in states that allowed full expansion of short-term plans, versus states that restricted the expansion of the plans. The study found the following:
- States that allowed full expansion of short-term insurance saw lower percentages of people leaving individual health insurance plans, compared with states that restricted such plans, during the years 2018-2021.
- States that allowed full expansion saw much higher rates of insurers offering new plans; between 2018 and 2021, there was a 61% increase in new plans offered in those states. In states that restricted short-term plans, the increase was only 25%.
- Also during that time period, premiums in the individual market dropped more (-5.6%) in states that fully expanded short-term insurance than states that restricted the plans (-2.7%), for the lowest-priced silver plans (silver plans are the most popular choice among ACA marketplace offerings). Premiums also dropped more for full-expansion states in other tiers of coverage, compared to states with restrictions on short-term plans.
Blase concludes that the fears that many had about expanding short-term insurance plans have not been borne out by the experience of state markets over the past three years. “The projected costs, not to mention the significant concerns raised by the critics, have not come true,” he wrote. “States that fully permit short-term plans did not have reduced individual market enrollment, less choice of individual market coverage, or higher individual market premiums, as predicted by a number of analysts. On the contrary, actual experience shows that states that fully permit short-term plans have experienced improvements in their individual markets compared to states that restrict short-term plans on every dimension—enrollment, choice of plans, and premiums.”
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