Short-Term Plans Are Not ‘Junk Insurance,’ Obamacare Is

Short-Term Plans Are Not ‘Junk Insurance,’ Obamacare Is

For all critics’ carping about how short-term coverage epitomizes ‘junk insurance,’ these plans will provide another option for individuals who find Obamacare-compliant policies unattractive.
Christopher Jacobs
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On Wednesday, the Trump administration released its final rule regarding short-term, limited-duration insurance coverage. For all critics’ carping about how short-term coverage epitomizes “junk insurance,” these plans will provide another option for individuals who find Obamacare-compliant policies unattractive and unaffordable.

Pros and Cons of the Rule

The Cato Institute’s Michael Cannon lists a good summary of the rule’s benefits. At a time when the market for unsubsidized coverage away from the exchanges has dropped by nearly 40 percent, short-term plans will allow individuals who find Obamacare-compliant coverage unaffordable to purchase coverage.

The rule also expands consumer protections. By extending their maximum term from three to just under 12 months, the rule will protect people who buy short-term plans then develop a pre-existing condition. Moreover, individuals can purchase short-term plans that renew for up to 36 months, along with separate renewal guarantees—essentially, the option to buy insurance at some later date—that will protect them further into the future from higher premiums if they develop a pre-existing condition.

Whereas the Obama administration defined “consumer protections” as “protecting people from being a consumer” of anything other than exchange plans, the Trump administration’s rule allows consumers to buy coverage that actually protects them from future harmful health events.

That said, the rule brings with it two notable drawbacks. First, the administration believes it could raise federal spending by $28.2 billion over a decade. The estimate comes because some healthy people likely will leave the exchanges to buy more affordable short-term coverage, raising premiums—and thus premium subsidies—for those who remain in Obamacare-compliant plans. While the Congressional Budget Office estimated a much smaller (and slightly positive) fiscal impact, the rule could end up increasing spending at a time when the federal government has racked up $21 trillion in debt (and counting).

Second, the rule doesn’t repeal Obamacare—an obvious statement, but one with important implications. Another president can easily revoke the Trump administration’s actions, and the next Democrat will almost certainly do just that. While helpful, the rule itself should not serve as an excuse for Congress not to take action to repeal Obamacare’s harmful regulations—because if you like your short-term plan, and Congress does nothing, you probably won’t be able to keep it.

What’s the Real ‘Junk Insurance’?

While Obamacare supporters have frequently derided short-term plans as “junk” insurance, people who live in glass houses should not throw stones. Judging by their behavior, more liberals than you might think consider Obamacare plans sub-standard. Take, for instance, the executive director of the District of Columbia’s Health Benefit Exchange Authority, Mila Kofman. Last October, she called President Trump’s executive order paving the way for short-term plans “an all-out assault on the Affordable Care Act.”

But as I wrote last week, Kofman has refused to buy an Obamacare plan, because she claims she requires an employer subsidy—this despite making more than $217,000 per year. Given her sizable income, Kofman must not think exchange policies unaffordable, even without an employer subsidy.

After all, the Exchange Authority recently endorsed, and the District enacted, a mandate requiring people with far less income than her—that is, people like me—to buy unsubsidized coverage or pay a tax. Why does she not buy the insurance policies she sells—because she considers them “junk insurance?”

She’s not alone. At a briefing last month, Sara Collins, a vice president at the Commonwealth Fund, asked whether short-term plans and other non-Obamacare policies would have “warning labels on them.” Collins neglected to provide a warning of her own: She has not purchased an exchange plan. Lest one think she cannot afford to do so, Commonwealth’s tax filings reveal that for the 12 months ending in June 2017, Collins received $334,353 in total compensation (including benefits).

But for sheer chutzpah in the coverage department, Sabrina Corlette of Georgetown University’s Center for Health Insurance Reform may take the cake. In 2013, Corlette called limited-benefit policies similar to those envisioned by the short-term plans rule “really crappy.” On Twitter Tuesday, she cited a report indicating that short-term plans pay out a comparatively small percentage of premium dollars in medical claims to call them “the very definition of junk insurance.”

I consider the very definition of “junk insurance” a policy that one encourages others to buy but refuses to purchase. On that, Corlette has a sterling track record. At a 2016 briefing, her presentation included a bullet point about the need to increase exchange sign-ups. She went further in her oral remarks: “I think it’s critical to do everything we can do boost enrollment.”

But when I asked Corlette at that same 2016 briefing if she had taken her own advice and bought an exchange plan, I received a song-and-dance about her life as a “spoiled academic.” Lest anyone think her unfeeling, however, she allowed that “I do try to think about” individuals without employer-sponsored coverage when designing insurance coverage standards.

Principles Versus Power

That’s the point. If Obamacare advocates thought achieving the law’s goals was so critical, they would have put their money where their mouths are and enrolled in exchange plans long ago. For all liberals’ talk of solidarity and “We’re all in this together,” the unwillingness for individuals making hundreds of thousands per year to enroll in exchange coverage, even though they could easily afford to do so, astounds. Given their own failures to enroll, who are they to criticize President Trump for “sabotaging” the law?

Corlette’s explanation to me revealed many liberals’ motivation: The raw exercise of power to protect the great unwashed masses from themselves. The rulers may not even realize their own failure to abide by the same standards as the ruled. Others may think people like me too feeble-minded to discern their hypocrisy.

In their quiet moments, people like Kofman, Collins, and Corlette may wonder what strange confluence of events led the American people to elect Donald Trump, and empower him with the authority to dismantle their liberal paradise. But their failure to practice what they preach yields a ready answer: They need only look in the mirror.

Mr. Jacobs is founder and CEO of Juniper Research Group, a policy consulting firm based in Washington. He is on Twitter: @chrisjacobsHC.
Photo U.S. Air Force photo by Airman 1st Class Donald C. Knechtel

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