Trump administration to allow sale of cheaper, skimpier alternatives to Obamacare

Proposed regulations released Tuesday by the Trump administration would allow the sale of short-term health insurance plans as an alternative to more comprehensive and, for many people, more expensive Obamacare plans. From CNN Money:

“Americans need more choices in health insurance so they can find coverage that meets their needs,” said Health and Human Services Secretary Alex Azar. “The status quo is failing too many Americans who face skyrocketing costs and fewer and fewer choices. The Trump Administration is taking action so individuals and families have access to quality, affordable healthcare that works for them.”

The proposal would reverse an Obama administration decision to limit the duration of short-term health plans to no more than 90 days in order to make them less attractive…

Short-term health plans, which have been available for years and were originally designed to fill a temporary gap in coverage, are likely to be cheaper than Obamacare policies. But that’s because they are allowed to exclude those with pre-existing conditions and base rates on an applicant’s medical history, unlike plans sold on the Obamacare exchanges.

There’s no doubt this is going to be bad news for Obamacare. The GOP has already repealed the individual mandate, so starting with the next enrollment period (later this year) Americans will not face a financial penalty for choosing not to enroll in a plan. Most people will still want health insurance if they can possibly afford it. The creation of these skimpier but cheaper short-term plans will give many Americans another alternative. That’s going to be especially appealing to younger, healthier people who don’t feel they are getting their money’s worth out of the more expensive and comprehensive Obamacare plans. The result is probably another dip in enrollment and a sicker and older risk pool for Obamacare. Aware of this, insurers will seek to raise prices once again to compensate.

As I’ve mentioned a number of times, none of this will impact the people at the low end of the income scale who are getting their Obamacare insurance for free or nearly for free. For those folks, there is no downside to sticking with the more comprehensive plan. But this does mean that the gap between those who are heavily subsidized (or getting Medicaid) and those who are paying their own way continues to widen. The New York Times had a story about this yesterday:

Gwen Hurd got the letter just before her shift at the outlet mall. Her health insurance company informed her that coverage for her family of three, purchased through the Affordable Care Act marketplace, would cost almost 60 percent more this year — $1,200 a month.

She and her husband, a contractor, found a less expensive plan, but at $928 a month, it meant giving up date nights and saving for their future. Worse, the new policy required them to spend more than $6,000 per person before it covered much of anything.

“It seems to me that people who earn nothing and contribute nothing get everything for free,” said Ms. Hurd, 30. “And the people who work hard and struggle for every penny barely end up surviving.”

A few miles away in another wooded suburb, Emilia DiCola, 28, an aspiring opera singer who scrapes by with gigs at churches and in local theaters, has no such complaints. She qualifies for Medicaid — free government health insurance that millions more low-income Americans have gained through an expansion of the program under the Affordable Care Act…

Ms. Hurd remembers watching a documentary about people signing up for Obamacare coverage last year and bristling when someone who got a big subsidy gushed about the low price.

“I was like, ‘It’s not expensive for you because everybody else is paying for it,’” she said…

“I’m totally happy to pay my fair share,” she said, “but I’m also paying someone else’s share, and that’s what makes me insane.”

These are anecdotes but the Times also looks at the overall number of people that fall into each category in New Hampshire. About 25,000 pay full price for their Obamacare plans, the price of which jumped an average of 52% last year. Another 29,000 in the state get subsidized coverage, the cost of which went down in some cases. That doesn’t look like such a good deal when you’re the person working hard to pay for your coverage instead of the person getting it for free.

The Democrats’ solution to this problem is to hide the cost by moving to a single-payer program in which everyone gets “free” insurance. Of course, it’s not really free. Taxes would need to go up dramatically to pay for it. And those working hard would still be heavily subsidizing those who don’t work at all. But because all of the money would be paid through taxes, public awareness of who is paying for what would be greatly reduced. In short, people like Gwen Hurd would still be subsidizing those who choose not to work, she just wouldn’t be reminded of it when she wrote a check to cover her insurance premium every month.