ACA exchange plans are under attack

The Potential Impact of Short-Term Limited- Duration Policies on Insurance Coverage, Premiums, and Federal Spending

By Linda J. Blumberg, Matthew Buettgens, and Robin Wang
Urban Institute, February 2018

In Brief

On February 20, 2018, the Departments of Treasury, Labor, and Health and Human Services released a proposed regulation that would increase the maximum length of short-term, limited-duration insurance policies to one year. These plans, sold to individuals and families, are not federally required to comply with the Affordable Care Act regulations that prohibit annual and lifetime benefit limits, require coverage of all essential health benefits, and otherwise prohibit insurers from setting premiums or choosing whether to sell coverage to particular people based on applicants’ health status and health history. As such, these plans do not meet minimum essential coverage standards under the law; thus, the Congressional Budget Office does not consider them private insurance. If implemented, the rule would permit these plans to compete against the ACA-compliant plans.

Importantly, this change would be implemented on top of an array of other significant policy changes made since the beginning of 2017. We analyze the implications of the 2017 policy changes relative to the ACA as originally designed and implemented (prior law), in addition to the potential consequences of the proposed expansion of short-term limited-duration policies. In estimating the effects of these changes on insurance coverage, premiums, and federal spending, we take into account the variations in state circumstances and state-specific laws on short-term plans.

Key findings include the following:

* The elimination of the individual-mandate penalties and the other policy changes, such as the withdrawal of cost-sharing reduction payments and the diminution of federal investments in advertising and enrollment assistance during 2017 that affected the 2018 open enrollment period, will lead to an additional 6.4 million people uninsured in 2019 compared with prior law (12.5 percent of the nonelderly population uninsured compared with 10.2 percent).

* The introduction of expanded short-term, limited-duration policies, consistent with proposed regulations, would increase the number of people without minimum essential coverage by 2.5 million in 2019. Of the 36.9 million people without minimum essential coverage, 32.6 million would have no coverage at all (completely uninsured), and 4.2 million would enroll in expanded short-term limited-duration plans.

* The combined effect of eliminating the individual-mandate penalties and expanding short-term limited-duration policies would increase 2019 ACA-compliant nongroup insurance premiums 18.2 percent on average in the 43 states that do not prohibit or limit short-term plans.

* Federal government spending in 2019 will be an estimated 9.3 percent higher than under prior law, owing to the combined effect of expanding short-term limited-duration policies, eliminating the individual-mandate penalties, and other recent policy changes. This increase in federal spending is lower than the overall increase in premiums because of cost reductions caused by decreases in enrollment.

From the Discussion:

The expansion of short-term limited-duration policies implied in the current administration’s proposed rule has significant implications, particularly for insurance coverage and premiums in the remaining ACA-compliant insurance market. We estimate that ACA-compliant private nongroup coverage would fall by 2.1 million people in 2019 from the expansion of STLD policies alone, exacerbating the nongroup market decline of 5.5 million people already anticipated in 2019 because of the elimination of the individual-mandate penalties and other policy changes made since early 2017. The effects will vary across the states given differences in state laws and regulations as well as differences in health care costs and population characteristics. In the 43 states most affected, premiums in the ACA-compliant nongroup insurance market would increase 18 percent on average owing both to the expansion of the short-term plans and elimination of the individual-mandate penalties. This premium effect would be 20 percent or higher in nine states. Those affected by these large premium increases would be disproportionately middle-income people with health problems because they prefer health insurance that covers essential health benefits, are unlikely to have access to medically underwritten short-term limited-duration policies, and are not financially protected by the ACA’s premium tax credits. For people who have ACA-compliant coverage and are eligible for premium tax credits, these higher premiums translate into higher premium tax credits per enrollee paid by the federal government. In total, 9.0 million fewer people would have insurance (minimum essential coverage) compared with prior law.


Twenty states sue federal government, seeking end to Obamacare

By Eric Beech
Reuters, February 26, 2018

A coalition of 20 U.S. states sued the federal government on Monday over Obamacare, claiming the law was no longer constitutional after the repeal last year of its requirement that people have health insurance or pay a fine.

Led by Texas Attorney General Ken Paxton and Wisconsin Attorney General Brad Schimel, the lawsuit said that without the individual mandate, which was eliminated as part of the Republican tax law signed by President Donald Trump in December, Obamacare was unlawful.

“The U.S. Supreme Court already admitted that an individual mandate without a tax penalty is unconstitutional,” Paxton said in a statement. “With no remaining legitimate basis for the law, it is time that Americans are finally free from the stranglehold of Obamacare, once and for all,” he said.



By Don McCanne, M.D.

This Urban Institute analysis demonstrates once again that the Trump administration has been effective in reducing both the adequacy and prevalence of health insurance coverage. Elimination of the individual mandate penalties, elimination of cost sharing reduction payments, and slashing advertising and enrollment assistance funding for ACA exchange plans have already had a negative impact, and now they will be enticing healthy individuals to move from ACA-compliant plans into short-term, limited-duration junk insurance.

Linda Blumberg and her colleagues estimate that next year about 33 million people will have no insurance at all, another 4 million will be enrolled in these almost worthless junk insurance plans (total of 37 million without minimum essential coverage), and, of course, tens of millions will still be underinsured because of the inadequacies of the ACA-compliant plans. Further, adverse selection in the ACA-compliant nongroup plans is likely to cause an 18 percent increase in their premiums. Some private insurers may find these markets no longer favorable and withdraw from them. Junk plans are no substitute since they do not protect patients in need.

The ACA exchanges barely squeaked through in a Supreme Court decision that ruled that the individual mandate penalties were taxes and therefore constitutionally permissible under federal law. Since this penalty for being uninsured has now been removed, twenty states are suing to have the Affordable Care Act overturned, arguing that since the constitutional tax no longer exists,  the ACA exchanges supposedly no longer have a legal basis for their existence. There will no doubt be many varying legal opinions on this argument, but the fact remains that the attacks on ACA will continue.

It has already been established that Medicare is constitutional. In fact, the Supreme Court has ruled that individuals cannot decline to be enrolled in Part A of Medicare if they accept Social Security benefits. They are mandated to accept Medicare enrollment. Also Medicare is not as subject to absurd administrative decisions designed to trash the program, partly because of the legacy law and decisions supporting the program, and partly because it would be political insanity for Congress and the Administration to attempt to reduce or eliminate Medicare, considering its great popularity with the public.

It would be foolish to hope that the damage being done to the Affordable Care Act will somehow not have a negative impact and that tweaking it will counter the multitude of policy studies that show that it is the most expensive way of expanding health care and yet falls tragically short of our universal reform goals. With the growing popularity of the Medicare for All concept, the obvious path that we should be following is to affirm the constitutionality of Medicare by improving it and then expanding it to cover everyone.

Stay informed! Visit to sign up for daily email updates.