Trump’s Skimpy Health Insurance Plans, Coming to a Market Near You

(Bloomberg Opinion) -- President Donald Trump’s efforts to rein in prescription drug prices aren’t going very well. His attempts to erode the Affordable Care Act are going just fine. 

A federal judge on Friday upheld an administration rule that expands the availability of short-term health-insurance plans that don’t have to abide by Obamacare regulations.The ruling is excellent news for companies that sell those plans; they’ll feel more confident in expanding their offerings and marketing. It’s not positive for just about everyone else, potentially saddling more people with shoddy insurance and making good coverage more expensive than it already is. 

The rule took effect last year and permits short-term plans that skirt Obamacare regulations to last for a year instead of just three months. It also allows people to renew them. These plans don’t have to cover essential health benefits like prescription drugs or emergency care. What’s more, they can discriminate against people with pre-existing conditions, and don’t have to spend 80% of premiums on medical care. As a result, they are cheaper and will appeal to younger and healthier individuals and those that find comprehensive coverage too expensive. 

Expanding these plans is a bad idea on many fronts. It’s bad for the government because if these plans siphon healthier people out of the regulated market, the population that remains will be sicker and more expensive to insure. Premiums will rise, and the subsidies that the government pays to low-income Americans on the individual market will rise with them. The fact that Republicans zeroed out the penalty for not meeting the requirement of obtaining health care-coverage (the individual mandate) could compound this effect. 

It’s bad for insurers who participate in Obamacare, who now face new uncertainty in a market that is finally looking more stable and profitable. And it will be bad for many consumers, as well. These plans will appeal to healthier people that are willing to take the risk of having less comprehensive coverage in return for a lower premium. It may well work out for some, but could result in financial disaster for anyone who gets sick.

Marketing for these plans can be confusing, and most consumers aren’t especially savvy about insurance benefits. People can and do sign up for such plans without knowing that they don’t benefit from Obamacare’s protections. They may not find out until a huge medical bill arrives. These offerings likely won’t be a good option for people with pre-existing medical conditions, and they could end up paying more for the comprehensive insurance they need if premiums rise.  

The administration argues that expanding these plans will allow for more choice and cheaper options for some people. A better solution is bolstering rather than sabotaging the individual market so that insurance that deserves the name becomes affordable to all.

To contact the editor responsible for this story: Beth Williams at bewilliams@bloomberg.net

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

Max Nisen is a Bloomberg Opinion columnist covering biotech, pharma and health care. He previously wrote about management and corporate strategy for Quartz and Business Insider.

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