Plan for Cheaper Insurance More Costly Than Estimated

WASHINGTON — President Donald Trump’s plan to expand access to skimpy short-term health insurance policies, as an alternative to the Affordable Care Act, would affect more people and cost the government more money than the administration estimated, an independent federal study says.

The study, by Medicare’s chief actuary, suggests that the new policies would appeal mainly to healthy people, including many who have had comprehensive coverage under the Affordable Care Act.

The administration estimated in February that a few hundred thousand people might sign up for the “short-term, limited-duration policies,” which would not have to provide the standard health benefits like preventive services, maternity care or prescription drug coverage.

But the chief actuary, Paul Spitalnic, estimates that 1.4 million people could sign up for the short-term policies in the first year, with enrollment reaching 1.9 million by 2022.

Under current rules, such short-term insurance cannot last for more than three months. Under a rule proposed by the Trump administration in February, the limit would be 364 days.

The new policies would probably attract people who do not need the full suite of benefits guaranteed by the Affordable Care Act, Spitalnic wrote in a recent memorandum.

Those remaining in Affordable Care Act marketplaces “would be relatively less healthy,” Spitalnic said, and as a result, the average premiums for those insurance policies would increase.

The federal government subsidizes premiums for most people who buy insurance in the marketplace. When premiums rise, the subsidy payments from the federal Treasury also increase.

The Trump administration estimated the extra cost to the federal government at $96 million to $168 million a year.

But the chief actuary, whose independence is protected by federal law, estimates that the rule proposed by the administration could increase federal spending by $1.2 billion next year and by a total of $38.7 billion over 10 years.

In its latest regulatory agenda, the administration said that a final rule expanding access to short-term policies could come next month. The rule would carry out an executive order signed by Trump with fanfare in October.

The executive order said the new policies would provide “an appealing and affordable alternative” because they would be “exempt from the onerous and expensive insurance mandates” in the Affordable Care Act.

When he signed the order, Trump said that short-term insurance would become “much more widely available” and that it would “cost us nothing.”

Spitalnic confirmed that the new policies would be cheaper for many consumers. He estimated that the full unsubsidized premium for a marketplace plan would be about $600 a month next year, on average — about 75 percent more than the premium of roughly $340 for short-term policies.

But the new short-term plans would also offer less protection to consumers.

Seema Verma, the administrator of the Centers for Medicare and Medicaid Services, defended the president’s proposal.

“Because costs have gone up so much, there are a lot of individuals who can’t afford any coverage,” she said on Tuesday at a Washington Post event exploring the future of health care. For some of these people, she said, short-term plans “potentially could be a lifeline.”

Trump announced a major initiative last week to reduce consumers’ out-of-pocket costs for prescription drugs. But a new study by the Kaiser Family Foundation says that many short-term insurance plans do not cover prescription drugs outside the hospital, leaving consumers to pay the bills.

Short-term insurance policies were originally intended for people who were between jobs or needed temporary coverage for other reasons. Under the proposed rule, they could play a larger role.

“There is nothing in the proposed rule that would prevent companies from underwriting and issuing new policies to individuals at the end of the one-year coverage term,” Spitalnic said.

Under the Affordable Care Act, the most popular type of marketplace plans, so-called silver plans, cover 70 percent of health care costs for a typical population. By contrast, Spitalnic said, the new short-term plans would cover 50 percent of costs, on average.

Short-term plans can exclude coverage for pre-existing conditions and can omit some benefits deemed essential in the Affordable Care Act.

Thus, for example, some short-term plans offered by UnitedHealth Group do not provide prescription drug coverage and do not pay expenses related to a normal pregnancy or the treatment of mental disorders, according to a brochure from the company.

Another insurer, National General, says in a brochure that its short-term medical plans may not cover outpatient prescription drugs, normal pregnancy or childbirth, routine well-baby care or costs resulting from a pre-existing condition.