President Donald Trump has long championed the interests of businesses, and during his time in office, this has not changed. From attempts to prop up the failing coal industry to a tax cut that heavily favors corporations, President Trump has become one of the business community’s biggest allies.
In an effort to help small business owners, President Trump is also rolling out a new set of rules that would enable small businesses and unions to offer slimmed-down health plans. Under the current Affordable Care Act, all health insurance policies sold to individuals and employees of small businesses must include essential health benefits that include preventive services, hospital care and maternity care.
Last month, the Trump administration announced that it would implement rule changes that would allow small businesses to operate in a regulatory regime similar to large companies. Large employer health plans are exempt from many of the regulatory requirements stipulated in the Affordable Care Act.
This should lower the costs of covering employees at small businesses with less than 100 or 50 employees (as determined under state law). Small business owners and trade unions would now be able to offer lower cost health plans with minimal coverage. This would allow smaller companies to lower their coverage costs, but many workers may have to pay more if they are older or sicker.
What Is in the Trump Health Plans?
The Trump administration is able to circumvent the legal requirements of the Affordable Care Act by allowing insurers to sell “short term” health plans that offer 12 months of coverage. The Affordable Care Act allows short term plans to forego essential health benefits and alter premiums based on age, gender or health. Previously, these short term plans could only remain in force for three months and could not be renewed.
The key selling point of these new health plans is the lower price tag. It is estimated that union members could see their annual premiums drop by $9,700 while small business employees could save as much as $2,900 a year in premiums. These plans can have such low rates because they offer fewer benefits and have healthier enrollees.
Although these new health plans may have a lower upfront cost associated with them, many enrollees may find that they come with extremely large hidden costs. Unlike most health plans that can be found through reputable insurance brokers like Boost Health Insurance, these new plans may only be available through small employers or trade associations—typically a red flag that these new plans may not be reliable.
The government may not be making these policies widely available through conventional channels because their benefits are so limited. Many new enrollees could discover that these short term plans may not provide many of the coverage benefits they have come to expect with policies following the passage of the Affordable Care Act. This could come as a big surprise if they encounter a pricey medical service like childbirth or cancer treatment. Many of these low-cost plans keep prices so low by only negotiating on a minimum of services with local providers.
This often means very high out-of-pocket expenses as well as high annual deductibles. Many of these plans require that you pay thousands of dollars each year before your insurer starts making payments. Because these short term plans are not really regulated by the Affordable Care Act or any other law, there are no standard coverage requirements. For example, only 30 percent even cover prescription medications. Additionally, many short term plans will deny applicants who have a preexisting condition. Even if you are sick and obtain coverage, the insurer is free to raise your rates or limit your benefits.
Furthermore, many of these policies offer limited coverage on certain benefits. For example, one plan only allowed $3,000 in mental health services. Most of these policies also impose a lifetime limit on how much they will pay out.
Of course, having some insurance is better than no insurance. After all, most of these plans offer thousands of dollars in coverage in the event of a catastrophic medical event. Many of the ACA-sponsored health plans also have high deductibles that place a heavy financial burden on policyholders.
The Effect on Insurance Markets
Since prior to his taking office, Donald Trump has been a vocal critic of the Affordable Care Act, and since assuming the presidency, he has made no secret of the fact that he wants to abolish the program. This new effort to introduce new short term health plans is likely a new attack on the ACA.
Although the administration has touted the new rules as a way to insure more people, it is unlikely to significantly add more Americans to the roll of insured. Trump argues that only about 100,000 to 200,000 of those currently enrolled in ACA plans will switch to the new short term plans, and many of the 28 million who remain uninsured could finally get some coverage.
However, analysts paint a different picture. Almost 27 percent of Obamacare enrollees are aged 18 to 34, the most likely demographic to purchase these new plans. If a substantial number of these young people leave the Obamacare exchanges, then the insurance pools will shrink, leaving primarily older and sicker enrollees.
Left with a smaller pool of primarily unhealthy policyholders, insurers will have to raise premiums to offset the costs of covering this population. In turn, as premiums on Obamacare policies rise, more people could switch to cheaper, short term plans. This could significantly degrade the viability of these insurance markets.
So, the new moves by the Trump administration will likely benefit healthy, young people, but it may raise the price of health insurance for almost everyone else. There is no way to know if this new policy will be the final blow for the Affordable Care Act, or if it will merely prompt new changes by lawmakers and the insurance industry.
To learn more about the new rules on health plans, please visit Boost Health Insurance.