The voices of Urban Institute's researchers and staff
August 2, 2018

Three ways short-term health plans could damage the US health system

The Trump administration recently finalized regulations expanding access to short-term, limited-duration policies. A lawsuit filed today argues that the president is violating the Constitution by seeking to undermine the Affordable Care Act (ACA).

These new regulations increase the maximum length of short-term, limited-duration insurance policies to just less than one year. These plans, sold to individuals and families, are not federally required to comply with the ACA regulations that prohibit annual and lifetime benefit limits, require coverage of all essential health benefits, and otherwise prohibit insurers from setting premiums or choosing whether to sell coverage to people based on applicants’ health status and health history.

As such, these plans do not meet minimum essential coverage standards under the law. The rule permits these plans to compete against ACA-compliant plans.

In March, we released an analysis of the potential consequences of the proposed expansion of short-term, limited-duration policies. Since that release, Hawaii and Vermont have passed legislation that will effectively prevent the expansion of short-term, limited-duration policies in their markets. Plus, New Jersey passed a state individual mandate to replace the federal penalties eliminated in 2019 under the 2017 Tax Cuts and Jobs Act.

We’ve provided updated tables [pdf] taking these state legislative changes into account. Three key findings from our update are the following:

  1. 2.2 million fewer people are estimated to have ACA-compliant nongroup insurance coverage in 2019, a decrease of 15.5 percent.

Approximately 600,000 fewer people will enroll in ACA compliant nongroup coverage using premium tax credits and 1.6 million fewer people will enroll in compliant coverage without the benefit of tax credits.

  1. The number of people without minimum essential coverage is estimated to increase by 2.6 million.

The introduction of expanded short-term, limited-duration policies will increase the number of people without minimum essential coverage by 2.6 million in 2019, to 36.9 million people. Of those without minimum essential coverage, 32.5 million will be completely uninsured, and 4.3 million will enroll in expanded short-term, limited-duration plans.

  1. Premiums in the ACA-compliant nongroup market are estimated to increase by more than 18 percent in the states most affected.

The combined effect of eliminating the individual mandate penalties and expanding short-term, limited-duration policies will increase 2019 ACA-compliant nongroup insurance premiums 18.3 percent on average in the 43 states (including the District of Columbia) that do not prohibit or limit short-term plans.

President Donald Trump holds up the executive order he just signed on health insurance which, among other things, extends short-term coverage policies, on October 12, 2017 in Washington, DC. The executive order was widely seen as a big blow to the Affordable Healthcare Act. Photo by Mandel Ngan/AFP/Getty Images.

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