Trump Just Made Health Insurance Cheaper! (Opinions)

Has Trump Made Medical Insurance Cheaper?… Yes, and No

Trump likely just made health insurance cheaper for some with his executive order on association plans and short term insurance. We look at the pros and cons.

Trump’s new healthcare policies have made it possible to bring back insurance plans such as association plans that cut the cost of health insurance by limiting coverage to what buyers anticipate needing.  Now men won’t have to buy plans that cover pregnancy, and young people won’t need to pay for old people’s diseases. According to Sean Hannity and Rush Limbaugh, we will now move toward a free market for healthcare.

One of the ideas that Sean Hannity likes, in particular, is Trump’s provision to allow groups and associations to offer medical insurance policies that can not only be sold across state lines but tailored to the needs of the group. Rush Limbaugh and others have applauded the insurance companies ability to pick and choose benefits tailored to what people anticipate needing.

It makes sense. We know we all need auto insurance, but we can choose what we want to insure ourselves for (subject to legal minimums).

If we can afford to replace or repair our car if it is damaged, stolen, or vandalized, we can skip comprehensive insurance. We can bet that our vehicle won’t be in a fire, hurricane or other natural disaster, won’t be damaged in a riot or vandalized, or encounter animals such as deer crossing the road. Of course, if these events should happen without comprehensive coverage, we will have to deal with the loss out-of-pocket, but it is a risk we choose to take.

Our auto insurance has to cover a certain amount of liability in case we hurt other people or cause property damage, but we often bet that we won’t hurt anyone or cause damage that is more than our liability limits will pay. We understand that, if we have a bad accident and it is judged to be our fault, the cost can be way more than our liability limits, and we may have to pay out of pocket for any excess even if that means using all our money or selling our possessions. Again, we choose our risks.

Health insurance will now become more like car insurance. You will decide what risks you are most likely to have and then insure against them. Healthy young men will not have to have insurance that covers pregnancy, nor will healthy young people have to carry insurance that covers mammograms or colonoscopies. People can decide if they are likely to need mental health services or prescription drugs. Childless people would not need coverage for children as long as they didn’t have unexpected pregnancies.

Association plans would cover groups the same way. Members of the group could decide what risks they were willing to run. They could also place limits on coverage, say $1,000,000 lifetime coverage on hospitalization or treatment. For more information on association plans and the changes in plan provisions from state to state, please see Association Health Plans: What’s All The Fuss About? ^[1]

In the past, some association plans were very good, but not all of them. Historically, association plans have had large percentages of unpaid claims. They have been known to base renewal on claims experience. They have been caught replacing advertised plans with others offering less coverage, having insolvent insurers, and engaging in outright fraud.^[2] The same lack of regulatory oversight that allows them to offer less expensive insurance, means that they can engage in substandard practices without getting caught right away.

Limiting coverage works well as long as you can predict the future accurately. If you have an unplanned medical catastrophe and have chosen a plan like an association plan that fails to cover that risk, you will be without the ACA’s Ten Essential Benefits. This could force you into the kind of medical bankruptcies that used to be so common. Alternately, you or your spouse or children might have to go without necessary medical care because of cost.

It’s true that everyone is entitled to healthcare in a life-threatening emergency. However, this does not include preventive care or ongoing medical needs. In fact, if you have appendicitis but your appendix has not burst yet, you will have to wait until it does to qualify for care unless a hospital decides to be very kind to you. Also, you will be billed and can go into collection. If you don’t pay, your uncompensated care is shared by taxpayers.

In other words, plan prices will certainly come down, but those unlucky enough to get sick or need care could be facing some extraordinary costs. Thus, this move will make some very happy, but have some serious implications for those facing medical costs (especially now that their networks will lose young healthy people and thus they will likely have to start paying higher premiums).

Summary

Once you eliminate minimum essential benefits such as eliminating coverage without penalty for preexisting conditions and lifetime maximums, you can sell cheaper healthcare insurance. If you are young, childless, and healthy, you may be fine. Trump will have helped you get “cheaper” health insurance that won’t necessarily provide adequate coverage or network of providers when you actually need it.

However, if the healthy people leave the market, the rates will be driven up for the remainder. Some of them will not be able to afford insurance any longer and will have to fall back on taxpayer assistance. Also, not all those who start out healthy will remain so. This will create a humanitarian problem of massively increase numbers of uninsured people without access to insured healthcare. At the very least, the newly uninsured will add to the taxpayer’s burden of care for uncompensated care.

We should consider whether lower premiums are worth the social and financial cost.

1. Association Health Plans: What’s All The Fuss About?
2. Dissecting Problems in Association Health Insurance