The Trump administration just made another big move to reshape the healthcare system

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February 20, 2018 6:02 PM

The new rule from the Trump administration will expend access to short-term health insurance, possibly undermining the Obamacare insurance exchanges.

The Department of Health and Human Services debuted a new rule expanding the use of short-term health insurance plans.
The rule would allow people to use short-term plans that do no comply with Obamacare regulations for up to 12 months.
People are currently only allowed to use such plans for three months.
Health policy experts say the plan will increase costs for the government and many sick people in the middle class who get their insurance through the Obamacare exchanges.

The Trump administration on Tuesday debuted a new rule that would allow Americans more access to short-term health insurance plans, in a move that some experts warn could have serious consequences for the Affordable Care Act, or Obamacare.

The new rule would permit people with individual health insurance to purchase short-term coverage for up to one year.

Currently, these short-term plans — which are designed to fill gaps in coverages in case someone loses their job or experiences a major life change — can't be used for more than three months.

The Trump administration says the expanded use of short-term health plans will allow people greater flexibility and lower prices for healthy people.

These short-term plans offer skinnier sets of benefits and do not have to abide by all regulations under the Obama-era health law. For instance, the plans can charge people more based on their health history, cap the amount of benefits a person can receive, and do not have to cover what are known as essential health benefits — 10 baseline types of care.

Given the "skinny" nature of the plans, they typically cost less up front and can save healthier people money.

But many health policy experts warn that shifting more healthy people from Obamacare markets to these short-term plans could drive up costs for sicker people who remain in the individual ACA marketplaces.

According to the administration's memo on the new rule, between 100,000 and 200,000 people are expected to take advantage of the new plans and shift out of the Obamacare marketplaces.

Larry Levitt, a senior vice president at the Kaiser Family Foundation, a health policy think tank, said lower-income people in the ACA marketplace will be protected since they receive subsidies to offset the cost of insurance. But he predicted middle-class people would get hit hard.

"Short-term insurance plans will cherry pick healthy people, leaving ACA-compliant plans to cover a sicker pool with higher premiums," Levitt tweeted. "

He said the expansion would force the federal government to offset cost increases for some people by hiking tax credits they get on their premiums. The administration's memo said the need for increased premium assistance would cost the federal government between $96 million and $168 million per year.

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