QuickTake: Consumers Support Allowing Cheaper, Less Generous Plans, but Not if It Means Sick People Pay More for Comprehensive Coverage

 

Michael Karpman

August 16, 2018

 

On August 1, 2018, the Departments of the Treasury, Labor, and Health and Human Services issued a new rule expanding access to short-term, limited duration health insurance plans (short-term plans).1 The rule increases the maximum initial contract term of short-term plans from three months to up to one year and allows the same plan to be renewed or extended for a maximum duration of up to three years.2 Designed to fill temporary gaps in coverage, short-term plans are not required to meet the Affordable Care Act’s (ACA’s) rules mandating coverage of essential health benefits; establishing actuarial value standards and limits on out-of-pocket spending; prohibiting annual or lifetime coverage limits; or banning insurers from denying coverage, excluding benefits, or varying premiums based on a preexisting condition (Lucia et al. 2018).3

 

Although consumers who purchase short-term plans will likely pay lower premiums than they would for an ACA-compliant nongroup plan, the policy change is expected to increase adverse selection in the nongroup market (also referred to as the individual market).4 The administration anticipates that “most of the individuals who switch from individual market plans to short-term, limited duration insurance will be relatively young or relatively healthy” and that “if the individual market single risk pools change, the change will result in an increase in gross premiums for the individuals remaining in those risk pools.”5

 

Urban Institute researchers have estimated that the combined effect in 2019 of expanding access to short-term plans and repealing the individual mandate penalty would increase average premiums for ACA-compliant plans 18.3 percent in states that do not restrict short-term plans and that the expansion of short-term plans will lead to 2.6 million fewer people having minimum essential coverage than under current law (Blumberg, Buettgens, and Wang 2018a, 2018b). Their study also estimated that 4.3 million people would purchase short-term plans.

 

HRMS Data on Public Attitudes toward Noncompliant Plans

 

Data from the March 2018 round of the Urban Institute’s Health Reform Monitoring Survey (HRMS) assessed public attitudes toward health plans, such as short-term plans, that are sold directly to consumers and do not comply with ACA coverage standards. We randomly assigned approximately half of the 9,609 adults ages 18 to 64 who participated in the survey to receive questions on this topic, yielding a sample of 4,881 respondents. Respondents were asked the following yes-or-no questions:

 

Federal policymakers are considering proposals to loosen restrictions on the types of health plans that can be purchased directly from an insurance company. Do you think health insurance companies should be allowed to offer health plans that…

  • Have lower premiums for less comprehensive services?
  • Exclude people with pre-existing medical conditions, such as diabetes or cancer?
  • Do not cover services related to an individual’s pre-existing conditions?
  • Charge higher premiums for people with pre-existing conditions compared to healthy people?
  • Shift healthy people to less comprehensive plans with lower premiums while leaving sick people in more comprehensive plans with higher premiums?

 

Because short-term plans may be purchased by adults who are insured with nongroup plans or uninsured as well as by adults with employer-sponsored insurance who may experience coverage gaps between jobs, we examine differences in attitudes for each of these coverage categories.6 We also focus on attitudes among adults with and without chronic conditions or disabilities, because short-term plans are likely to only be available to adults with limited needs for health care and their increased prevalence may lead to higher premiums for ACA-compliant plans sought by adults with greater health care needs.

 

We found that 70.8 percent of adults thought insurers should be allowed to offer plans that have lower premiums for less comprehensive services, as the proposed short-terms plans would likely have (figure 1). Although this opinion seems to support the expansion of short-term plans, it conflicts with other attitudes respondents hold about insurance coverage that would be allowed under the new rules. More than 80 percent did not think insurers should be allowed to offer plans that deny coverage or establish coverage exclusions based on preexisting conditions, and nearly three-quarters (73.7 percent) did not think insurers should be allowed to offer plans that charge higher premiums for people with preexisting conditions. Respondents also did not think that insurers should be allowed to offer plans that have the effect of leading to higher premiums for sicker people: 67.3 percent did not support allowing plans that shift healthy people to cheaper, less comprehensive plans while leaving sicker people in more expensive comprehensive plans.

 

 

Support for allowing cheaper, less comprehensive plans was greater among adults with employer-sponsored insurance than it was for adults with nongroup coverage or the uninsured (76.0 percent versus 68.4 percent and 59.6 percent, respectively; figure 2). However, adults in each coverage category were less likely to support allowing plans to use preexisting conditions to determine who or what to cover and how much coverage would cost. Further, one-third or fewer of the adults in each coverage category supported allowing plans that lead to higher premiums for sicker people.

 

 

Similar patterns were apparent when comparing adults with and without a chronic condition or disability (figure 3). Adults with a chronic condition or disability and those without one were about equally likely to support allowing plans with lower premiums and less comprehensive services (69.9 percent and 72.2 percent), but each group expressed less support for allowing plans that directly or indirectly disadvantage people with preexisting conditions. Although adults with a chronic condition or a disability were more likely than those without one to oppose these types of plans, opposition was strong within both groups.

 

 

These results suggest that unless federal policymakers can convince people that expanding access to non-ACA-compliant short-term plans will improve choice, flexibility, and affordability without hurting people with preexisting conditions, this policy change may be very unpopular. Although people are willing to accept less coverage in exchange for lower premiums, strong majorities of adults reject proposals to allow medically underwritten plans that discriminate against people with preexisting conditions. These preferences may affect how insurers as well as state policymakers and regulators respond to the new federal rules on short-term plans.

 

References

 

Blavin, Fredric, Michael Karpman, and Stephen Zuckerman. 2016. “Understanding Characteristics of Likely Marketplace Enrollees and How They Choose Plans.” Health Affairs 35 (3): 535–9.

 

Blumberg, Linda J., Matthew Buettgens, and Robin Wang. 2018a. Updated: The Potential Impact of Short-Term Limited-Duration Policies on Insurance Coverage, Premiums, and Federal Spending. Washington, DC: Urban Institute.

 

Blumberg, Linda J., Matthew Buettgens, and Robin Wang. 2018b. Updated Estimates of the Potential Impact of Short-Term Limited-Duration Policies on Insurance Coverage, Premiums, and Federal Spending. Washington, DC: Urban Institute.

 

Lucia, Kevin, Justin Giovannelli, Sabrina Corlette, JoAnn Volk, Dania Palanker, Maanasa Kona, and Emily Curran. 2018. State Regulation of Coverage Options Outside of the Affordable Care Act: Limiting the Risk to the Individual Market. New York: Commonwealth Fund.

 

Notes


1Short-Term, Limited-Duration Insurance: A Rule by the Internal Revenue Service, the Employee Benefits Security Administration, and the Health and Human Services Department.” 83 Fed Reg. 38212 (August 3, 2018). ^

 

2 The final rule also allows insurers to offer separate short-term plans to consumers who have purchased these plans in the past, enabling consumers to hold short-term coverage under different insurance contracts for more than three years. The maximum duration of up to three years of coverage only applies to each individual contract for a short-term plan. ^

 

3 Essential health benefits include ambulatory patient services; emergency services; hospitalization; pregnancy, maternity, and newborn care; mental health and substance use disorder services; prescription drugs; rehabilitative and habilitative services and devices; lab services; preventive and wellness services and chronic disease management; and pediatric services (see “What Marketplace health insurance plans cover,” Centers for Medicare & Medicaid Services, accessed August 1, 2018). Actuarial value refers to the average share of costs paid by a health insurance plan for covered services. In 2018, the maximum out-of-pocket limit is $7,350 for single coverage and $14,700 for family coverage. ^

 

4 Rachel Schwab, “Stakeholder Views on the Proposed Short-Term Plan Insurance Rule: Key Takeaways from Our Review of Comment Letters,” Georgetown University Health Policy Institute, Center on Health Insurance Reforms, June 18, 2018. ^

 

5Short-Term, Limited-Duration Insurance: A Rule by the Internal Revenue Service, the Employee Benefits Security Administration, and the Health and Human Services Department.” 83 Fed Reg. 38212 (August 3, 2018). ^

 

6 To address measurement error in reporting of the type of health insurance coverage held by adults in our sample, we assign coverage type based on an editing process described in an earlier paper (Blavin et al. 2016). ^

 

About the Series

 

This QuickTake is part of a series drawing on the HRMS, a survey of the nonelderly population that explores the value of cutting-edge Internet-based survey methods to monitor the ACA before data from federal government surveys are available. Funding for the core HRMS is provided by the Robert Wood Johnson Foundation and the Urban Institute. The views expressed here do not necessarily reflect the views of the Robert Wood Johnson Foundation. The views expressed are those of the author and should not be attributed to the Urban Institute, its trustees, or its funders. Funders do not determine research findings or the insights and recommendations of Urban experts. Further information on the Urban Institute’s funding principles is available at urban.org/fundingprinciples.

 

For more information on the HRMS and for other QuickTakes in this series, visit www.urban.org/hrms.

 

About the Authors

 

Michael Karpman is a research associate with the Urban Institute’s Health Policy Center. The author is grateful to Linda Blumberg and Stephen Zuckerman for helpful comments on this QuickTake.

 

Urban Institute Robert Wood Johnson Foundation