What if there was a way to get much cheaper health insurance, anytime you want, without paying the Obamacare penalty?
The executive order President Trump signed last week might make that a reality. It encouraged federal agencies to make new rules regarding some relatively obscure types of insurance plans: short-term plans and association plans.
The most significant change might involve the short-term plans. These are very bare-bones plans that some people already buy if they’re between jobs or waiting for an open-enrollment period to start. Under Obamacare, these plans could only last three months, and they could not be renewed. The executive order—and the new rules federal agencies create as a result—might make them last up to a year and be renewable. In essence, people could start to use these short-term plans as their actual health insurance.
Is that so bad? To find out, I decided to compare what I’d be getting if I signed up for an Obamacare-compliant plan, complete with all the benefits and costs, versus a short-term plan that, if the federal government changes the rules, I could have as my new, ultra-low-cost health insurance. (This is a highly theoretical exercise, since like half of all Americans I get health insurance through work. Thanks work!)
First, I went to the Kaiser Family Foundation’s Health-Insurance Marketplace Calculator to find out what Obamacare plans I’d be eligible for. (After November 1, when open enrollment starts, if I was doing this for real I’d go to Healthcare.gov.)
I entered my real zip code, but I input an older age—51—in order to better replicate the experience of a truly pinched Obamacare customer. (On Obamacare, higher rates are determined by age, not health status.) According to the tool, a middle-grade Silver plan would cost me $450 each month in premiums.
That’s a lot. In fact, the sticker shock helps explain why brokers began issuing more short-term health plans after the Affordable Care Act was enacted: People were looking for a cheaper alternative to Obamacare plans.
But I have to remember that I get the upsides of the Affordable Care Act under this plan, too. The insurance company has to cover whatever health conditions I have right now, it can’t charge me more if I get sicker, and it has to cover a list of “essential health benefits,” like pregnancy, mental-health care, and prescription drugs.
Then I went to agilehealthinsurance.com, which sells short-term health plans. The good news: The plans are much cheaper. Most had premiums of less than $100. The deductibles were high—mostly $2,500 or $5,000—but that’s comparable to what you’d see on some Obamacare plans.
The pain started when I clicked “select this plan” and saw some of the short-term plan’s terms and conditions. Under “GENERAL DISCLAIMERS,” the site tells me the plan doesn’t cover pre-existing conditions. The plan’s “limitations and exclusions” page lets me know this means:
- Charges resulting directly or indirectly from a condition for which a Covered Person received medical treatment, diagnosis, care or advice within the sixty-month period immediately preceding such person’s Certificate Effective Date are excluded for the first 12 months of coverage hereunder.
- Pre-Existing conditions includes conditions that produced any symptoms which would have caused a reasonable prudent person to seek diagnosis, care or treatment within the sixty-month period immediately prior to the Covered Person’s Certificate Effective Date of coverage under the Policy.
That means if I’ve gotten treatment for a medical issue in the past five years, it won’t be covered by this plan.
If I get cancer, I have to wait 30 days before my treatment is covered. I can’t get counseling, mental-health care, or treatment for substance-abuse issues, and the plan doesn’t cover prescription drugs. And you can forget about obesity treatments, LASIK, sex-change operations, childbirth or abortion, dentistry, or eyeglasses. If I get injured while participating in college sports or the rodeo, I’m on my own. As a Texan, this is worth taking into account.
Dania Palanker, a professor at the Center on Health Insurance Reforms at Georgetown’s Health Policy Institute, examined a bunch of short-term plans and found that these types of restrictions were not unusual. One plan she saw would cover joint pain from an accident, but not arthritis. She also worries that people might not realize that these plans set limits on how much they will pay for various procedures, and the limits are often lower than the actual cost. “$1,250 on an intensive care unit, and $2,500 on a surgeon and anesthesiologist per surgery … I know that’s not enough,” she told me. “People who enroll in that plan and get surgery are not going to have the coverage they need, and are going to have tens of thousands of dollars in bills.”
Indeed, as Bloomberg reported recently, in 1992 the General Accounting Office found that short-term plans “left nearly 400,000 members and their beneficiaries with $123 million in unpaid medical claims in a four-year span.” This was still happening in 2014, when one woman Bloomberg found bought a short-term plan that collected six months of premiums before denying her treatment for breast cancer, leaving her with a $400,000 bill.
There are probably some more robust short-term plans out there, but the point of these is that they’re stopgap, in-case-you-get-hit-by-a-bus plans. States could regulate these to make them look more like comprehensive Obamacare plans, but that would take some time—and it would make them just as expensive.
“The reason these plans exist and are inexpensive is that they don’t have these requirements,” Palanker said. “It’s unlikely that the majority of states are going to really pass new, strong regulations on this market.”
My short-term plan website drives this point home in all caps: “THIS IS A SUPPLEMENT TO HEALTH INSURANCE AND IS NOT A SUBSTITUTE FOR MAJOR MEDICAL COVERAGE.”
Trump’s executive order might make it so that buying this plan would exempt me from Obamacare’s individual mandate penalty—the tax people have to pay if they don’t buy health insurance. Once again, Olga wins!
Except for this: I would probably only buy this plan if I was extremely healthy. In fact, I, personally, would not buy this plan unless a nuclear war annihilated all other insurance plans and all the earth’s plants and animals, because it doesn’t even cover allergy shots.
But thousands of other would-be Obamacare customers don’t have a choice: They simply can’t afford a regular health-insurance plan.
If federal agencies do bend the rules around short-term plans, a bunch of hale and hearty 20- and 30-somethings could find it tempting to sign up for plans like these. That leaves only sick and older people still shopping for comprehensive, Obamacare-level plans. Insurers might not be interested in covering a pool of self-selected people with known medical needs.
That would just add to the various ways—at least a dozen so far—that the Trump administration has undermined Obamacare already. Once these new rules come down, insurers could start to pull out of the individual market. Even now, the executive order is “another signal to health insurers that this is an administration that is not committed to strengthening and stabilizing the individual health insurance market,” Palanker said.
Anyway, I decided to click “apply now” for the short-term plan. Unlike Obamacare plans, this plan is allowed to ask people about their medical history. For the sake of this exercise, I told the questionnaire I had, in the past, had a doctor’s visit for one of a list of conditions that included things like diabetes, drug abuse, eating disorders, or cancer. (I hadn’t.)
It turned out I wouldn’t be getting a short-term plan after all. Unlike Obamacare, short-term plans are allowed to deny sick people, and they denied fake me.