by Katherine Restrepo
Director of Health Care Policy, John Locke Foundation
The Trump Administration is using the Executive Order process to its advantage in hopes that federal agencies will begin deregulating the health insurance market. If all goes according to plan, insurance carriers could begin selling short-term medical (catastrophic-like) health insurance plans outside of Obamacare’s Exchanges. Like Exchange plans, these plans are for people who don’t receive health insurance through their employer and therefore must purchase policies on their own.
Technically, it’s legal for insurers to sell short-term medical plans, but policyholders can only hold onto them for a maximum of three months at a time. Contracts originally lasted for as long as eleven months, but in 2016, the Obama Administration cracked down on their availability once it realized these plans were gaining popularity (sales increasing by 50 percent!). For Obamacare to “work,” the former Administration had to limit consumers to choose from overly regulated and overly subsidized health plans on Obamacare’s Exchanges – making them overly expensive and overly undesirable for many.
So, with a properly executed executive order, federal agencies could give more latitude to states so that insurance carriers can begin offering affordable health plans outside the exchanges that come with year-long contracts.
The media don’t seem to like the idea so much. CNN headlines read that the executive order “begins Obamacare dismantling.” The New Yorker calls it “terrible.” CNBC says the move “could undercut Obamacare markets.” The Washington Post claims that, “Trump’s Obamacare executive order could destroy the health-care system.”
To express this in a more diplomatic way, critics worry that the availability of cheaper health care plans outside the Obamacare exchanges will siphon off healthy policyholders who are currently paying for overpriced health care plans within the Obamacare exchanges. Healthy policyholders are instrumental in balancing Obamacare’s insurance markets, since their premiums and low-dollar health care claims help insurers offset costs incurred by their sickest customers.
Critics bring up a valid point about a probable “market segmentation” effect. One way to prevent even more market instability is for Congress or the Trump Administration to further deregulate the small group and individual health insurance markets. They can then give states more flexibility to administer federally funded high-risk pools for people with expensive health conditions.
What the critics get wrong, however, is that the Trump Administration isn’t to be blamed for imploding the individual insurance market. The individual insurance market is imploding under Obamacare as is. Since many of the law’s insurance regulations took effect in 2014, fewer insurers are participating on the Exchanges. Just look at North Carolina’s market. Only one insurance company is selling government- approved health insurance plans in the individual marketplace across all 100 counties of the state. Cigna sells plans in six counties.
For more information on the issue, see Avik Roy’s latest post on the Apothecary blog here.