Today’s Managing Health Care Costs Number is $695
Kaiser Health News reports that many young healthy Californians ineligible for federal subsidies have chosen ACA-noncompliant “short term health plans” to avoid the high cost of compliant plans available on the Obamacare exchanges.
“Depending on your age and income level, you could get one of these plans, pay the uninsured tax penalty and still pay less than if you had purchased” a comprehensive plan, says Kev Coleman, head of research and data for HealthPocket, a health insurance comparison website based in Mountain View.”
The reporter notes a host of potential problems with this trend. The short term plans don’t cover pre-existing conditions, and some medical services, like maternity care, might be excluded. The plans can “underwrite,” which means they can refuse to accept applicants who have existing illnesses or serious risks. Enrollees are still subject to the individual mandate penalty – which is not $695 or 2.5% of income, whichever is more. Those who enroll in short term insurance today might be refused renewal if their health gets worse during the year.
In short, these short term health insurance policies represent everything that was wrong about the individual insurance market before the Affordable Care Act. If such low insurance rates sound too good to be true, it’s because they ARE. The only way an insurer can write such business profitably is to “cream skim” only healthy people, and “laser out” many potential expenses.
I’ve heard plenty of grumbling from middle aged men that they don’t need a maternity benefit so “why should I pay for it?” But if we want maternity coverage to be affordable to pregnant women, we can’t simply let those not planning to have a child out of contributing premiums to help provide this coverage.
The worst public policy implication of these short term policies is that they attract the healthiest portion of the population, whose health insurance premiums are no longer available to cross-subsidize the health care of those with serious illnesses. This is a good illustration of why the individual mandate helps structure a socially more advantageous individual insurance market by discouraging such "cream-skimming" health plans. These short term health plans are fully insured, and while they are not prohibited by the Affordable Care Act, they can and should be strictly regulated or even prohibited by the states.
