Short Term Health Plan Expansion under Trump; Lower Costs For Some, Higher Costs For Others

The Trump administration is expanding short term health plans for 2019. The plans will be renewable for up to 36 months (like COBRA). The benefit is healthy Americans could pay less. However, costs are likely to be shifted to those on more robust plans.^[1]

The logic is simple, expanding short term plans allows healthy people to replace their major medical plans with cheaper short term plans with less benefits. Short term plans are not required to provide the essential benefits or to cover preexisting conditions.

Since many healthy people are likely to shift to short term plans, insurers will have to charge their remaining customers more for major medical plans to make up the difference.

That means the tax payer will likely pay more to subsidize coverage via the ACA (because the ACA costs consumer costs via subsidies paid to insurers), employers will likely pay more to provide employee health plans (because they offer major medical as benefits in most cases), and families who need more robust coverage will also likely pay more (because they in many cases need major medical and not limited benefit short term plans).

Thus, although the move by the administration will be a benefit in terms of choice and lowering costs for some, the cost burden in shifted to others and the state. The reason the ACA didn’t do this is in the first place was to avoid this problem. Anyway, now that we are here, it’ll be interesting to see how much of the costs are actually shifted. We know the theoretical outcome, but this move will give us a chance to see the outcome in practice.

1. Trump administration clears way for cheap short-term health plans to compete with Obamacare. CNBC.com.