Competition Between Short-Term, ACA Plans Will Cause Rising Premiums, Report Says

A new policy report examining the effects of the Trump administration’s changes to the Affordable Care Act (ACA) finds that premiums will rise in ACA insurance plans and more people will be without insurance in certain states.

The Urban Institute, a liberal think tank, examined state-by-state the combined effects of eliminating the individual mandate penalties and expanding the use of short-term limited-duration insurance plans that are not compliant with the ACA. Those 2 changes will increase premiums by 18.2%, on average, in 2019 in the 43 states that do not prohibit or limit short-term plans, it found.

The report noted that the short-term plans would compete with plans regulated by the ACA, which offer more robust health coverage by prohibiting annual and lifetime benefit limits, requiring coverage of all essential health benefits, and otherwise prohibiting insurers from setting premiums or choosing whether to sell coverage to consumers based on pre-existing conditions. The Congressional Budget Office does not consider the short-term plans private insurance.

Last week, the administration proposed extending the time period that Americans can stay in those short-term plans from 3 months to 12 months, following an executive order issued last October.

By allowing those plans to be sold for as long as a year, the Urban Institute report said, the policies could compete as medically underwritten, largely unregulated alternatives to ACA plans, pulling healthier people out of the ACA insurance market. That would leave the ACA marketplace with a population that is sicker and more expensive to insure than that in the short-term plans.

The report said that the end of the individual mandate penalties and other changes, such as the withdrawal of federal cost-sharing reduction payments to insurers and the administration’s decision to curtail ACA advertising and enrollment assistance during 2017 (thus affecting the 2018 open enrollment period), will cause an additional 6.4 million people to be uninsured in 2019 (12.5% of the nonelderly population uninsured compared with 10.2% under prior law). The individual mandate was abolished in the 2017 tax reform bill passed in December.

The Urban Institute said the short-term plans would increase the number of people without ACA-compliant insurance by 2.5 million in 2019. It estimated that about 4.2 million people would enroll in the expanded short-term plans.

Of the 36.9 million people without minimum essential coverage, 32.6 million would be completely uninsured.

The report also stated that federal government spending in 2019 will be an estimated 9.3% higher than under prior law, because of the combined effect of expanding the short-term policies, ending the individual mandate penalties, and other changes. This increase in federal spending is lower than the overall increase in premiums because of cost reductions caused by decreases in enrollment, the report said.

The Urban Institute said that Massachusetts would be affected the least by these decisions because it has its own individual mandate that remains in place. In addition, Massachusetts, New Jersey, New York, Oregon, Vermont, and Washington have laws preventing an expansion of the short-term plans.

However, ACA-compliant markets in Alaska, Arizona, Iowa, Louisiana, Mississippi, Oklahoma, West Virginia, and Wyoming will lose more than 40% of their enrollment because of these policy changes, according to the report.