New research from the Galen Institute offers evidence that the Trump administration's actions to relax regulations on an affordable category of health insurance—short-term, limited-duration medical insurance plans—benefited states’ insurance markets, contrary to what many prominent Democratic politicians and policy analysts predicted.
Short-term, limited-duration insurance plans, also called short-term plans, are insurance plans that are not subject to restrictive Obamacare regulations under federal law. Individuals may sign up for short-term plans year-round, not just during open enrollment season. These flexible plans’ premiums can be up to 80 percent cheaper than certain plans on the Obamacare exchanges.
Through regulatory action by the Trump administration in 2018, federal regulations for short-term plans were relaxed, allowing these plans to cover individuals for up to 36 months (rather than 3 months, which was the case during the Obama administration). In 2019, approximately 3 million people were enrolled in short-term plans.
Despite the cost savings and flexibility, prominent Democrats repeatedly referred to short-term plans as “junk insurance” and criticized the Trump administration's action. Some policy analysts projected that allowing the sale of short-term plans would adversely affect states' individual markets and draw healthier people away from Obamacare plans, making coverage less affordable for those remaining in the exchanges and increasing the number of uninsured.
A handful of progressive states placed additional state regulations on these plans, barring the sale of them completely, as shown by the chart below.
Source: Commonwealth Fund
Brian Blase, a senior fellow at the Galen Institute, analyzed the health of the individual insurance markets from 2018 to 2020 in states that matched Trump’s relaxed regulations on short-term plans compared to states that greatly restricted or banned the plans.
Blase found that the insurance markets in states that allowed the sale of short-term plans fared much better than states that placed stronger regulations on this category of insurance.
“States that permit short-term plans have lost fewer enrollees in the individual market, have had far more insurers offer coverage in the market, and have had larger premium reductions since the 2018 rule took effect,” Blase writes. “The only states where individual market premiums have increased since 2018 are the five states that effectively prohibit short-term plans.”
Overall, he concluded, “individual market premiums have declined since 2018, but the decline has been much more significant in states that fully permit short-term plans…”
Oklahoma was one of many states that matched the Trump’s administrations’ relaxed regulations in 2019 and allowed for the renewal for short-term plans for up to 36 months.
Despite the large number of enrollees in short-term plans and empirical evidence that these plans do not harm the state's individual insurance markets, policy analysts speculate the Biden administration may reverse Trump’s relaxation on short-term plans and reinstate a three-month maximum coverage for short-term plans.
Arbitrarily restricting options in health care and health insurance coverage is poor policy. The federal government and states should craft appropriate regulations that protect consumers but also allow more choices in healthcare, not fewer.
Data show that broad policy criticisms around short-term plans were unfounded. As health care prices continue to rise and insurance premiums in the exchanges remain high, policymakers should not bring back unnecessary regulations on short-term plans that would invalidate millions of individuals' affordable coverage.