When Arizona resident Marisia Diaz unwittingly bought a “short-term” insurance plan, she thought she was purchasing a comprehensive plan for medical care. But what her healthcare broker didn’t tell her was that the plan didn’t cover pre-existing conditions, capped doctor visits, and placed low limits on emergency room care, hospital visits, and surgeries.
Diaz told Bloomberg that she only became aware of just how little her family’s plan covered after her husband, David, had a double heart bypass operation in 2017. Six months later, they were shocked to receive a bill for $244,447.91.
Diaz’s experience with short-term insurance plans, or so-called “junk insurance,” isn’t an isolated one. The companies behind these plans have repeatedly come under fire for misleading policyholders and engaging in deceptive marketing practices.
Short-term insurance plans were originally included in the Affordable Care Act (ACA) as a temporary option for those experiencing a short gap in coverage, including those between jobs. These plans, which aren’t required to meet the minimum standards for coverage under the ACA, were previously limited to three month terms, but the Trump administration changed the policy in 2018, extending the limit to three years.
The Trump administration has marketed short-term insurance plans as a cheaper alternative for healthier customers, but the expansion of the plans has been met with significant resistance and skepticism.
Patient advocates and doctors oppose the plans for their lack of protections and coverage: they are not required to offer a minimum set of benefits; they can deny coverage for things like maternity care, mental health, and prescription drugs; they can limit coverage and set higher deductibles; and they can deny coverage for pre-existing conditions.
The AARP has also criticized the plans, claiming they allow insurance companies to “impose an age tax, charging older Americans much higher premiums.”
Many Democrats and left-leaning groups have also opposed the policy, claiming the expansion of cheap, short-term plans is part of a coordinated Republican effort to undermine the ACA by drawing healthier people away from its marketplace.
This fear isn’t unfounded; a 2018 Kaiser Family Foundation report found short-term plans could cause instability in the ACA exchange market, leading to higher premiums for policyholders and leaving more people uninsured.
But as two 2019 studies found, these short-term plans are cheaper for a reason. The studies — from the government’s own Center for Medicare and Medicaid Services (CMS), and from the National Association of Insurance Commissioners —found insurers spend mere pennies of every premium dollar on actual healthcare for policyholders.
As a result, these plans frequently leave policyholders facing high deductibles and out-of-pocket costs in return for minimal coverage.
Senate Democrats are expected to hold a vote on whether to roll back the Trump administration policy that makes it easier for insurers to sell junk insurance plans. While Democrats are unlikely to have the votes to roll back the ruling, they will still get Republicans, including Arizona’s Sen. Martha McSally (R-AZ), on the record regarding junk insurance plans.
Democrats held a similar vote in 2018, and McSally, then a Senate candidate, refused to reveal how she would have voted, saying “she wasn’t familiar with the legislation.”
The Trump administration’s policy is also being challenged in the courts by seven health groups, including the The Association for Community Affiliated Plans (ACAP), National Partnership for Women & Families, and Little Lobbyists.
“We remain firm in our contention that the Trump administration’s decision to expand dramatically the sale of junk insurance violates the Affordable Care Act and is arbitrary and capricious,” said Margaret A. Murray, Chief Executive Officer, Association for Community Affiliated Plans.
Murray said the administration’s decision to allow junk insurance to directly compete with the comprehensive plans under the ACA “subverts the health care protections of the ACA,” and derided junk insurance as “an inferior and hazardous substitute for comprehensive coverage.”
Other critics of these plans, which include the left-leaning Center for American Progress and the Center on Budget and Policy Priorities, argue they are just the latest in a line of Republican attempts to chip away at the ACA since they failed to repeal it in its entirety in 2017.
Since then, Republicans have successfully zeroed out the individual mandate, a requirement that all US residents obtain health insurance or pay a penalty. The mandate was implemented to ensure that more healthy people entered the health insurance market, thus helping lower premiums for ACA policies.
Republicans reduced the penalty for not having health insurance to $0, negating its impact and causing insurance premiums to rise, according to Sabrina Corlette, director of the Center on Health Insurance Reforms at Georgetown University.
The Trump administration also cut back on the ACA’s open enrollment advertising budget by 90% and has supported a lawsuit from Republican-led states seeking to overturn the ACA in its entirety.
It’s too early to directly measure precise impact of the expansion of junk insurance plans, but the cumulative impact of these policy changes is already being felt.
In Arizona, the number of people without insurance increased by 55,000 in 2018, marking the first time since the implementation of the ACA in 2014 that the number of uninsured people in Arizona increased. Nationwide, a total of 1.9 million more people were uninsured in 2018 than in 2017.
The future of short-term insurance plans remain unclear, but the Trump administration’s aggressive support of these plans appears to be working; the administration estimates that 700,000 people will be enrolled in short-term insurance plans by the end of 2019; up from fewer than 100,000 people at the end of 2018.