The Paragon Health Institute is working to protect Americans’ rights to purchase the health coverage that works best for them. That right is under threat given the Biden administration’s proposal to restrict health options, including placing severe federal limits on short-term limited-duration insurance (STLDI).
Today, Paragon released Short-Term Health Plans, Long-Term Benefits: States that Allow Short-Term Coverage Have Stronger Health Insurance Markets, a new empirical study I authored that shows the misguided basis for the administration’s proposed rule. And Paragon led the work on a comment letter, submitted to the federal departments today, opposing the proposal. This letter was signed by 40 policy experts from more than two dozen organizations, including the former chairman of the White House Council of Economic Advisers (CEA) Tom Philipson, former chief CEA economist Casey Mulligan, and heads of public policy research centers Avik Roy, Tarren Bragdon, John Goodman, Grace-Marie Turner, Paul Winfree, and Sally Pipes. From the comment letter:
The Departments’ proposal would restrict STLDI contracts to three months (with an option to renew for just one single month) and impose additional restrictions on excepted benefits. The proposed rule is misguided, punishing, ill-timed, and potentially unlawful. This rule would reduce affordable options for families, strip coverage from sick people and leave them facing huge medical bills with no coverage and increase the number of uninsured individuals from anywhere between several hundred thousand people to millions of people per year. Ultimately, this rule creates clear losers and only speculative and minimal benefits.
The timing of this rule is particularly harmful given that states began redetermining Medicaid eligibility earlier this year, and 18 million people are expected to be removed from Medicaid between April 2023 and the summer of 2024. Several million of these individuals would potentially benefit from STLDI plans.
Americans are not well-served when government prohibits the sale of insurance products. There has not been a public outcry about the problems with STLDI. If anything, the public comments on the proposed rule are largely from middle-class individuals and families who will be harmed by the rule as well as from health insurance brokers who are concerned that the rule would make it overly difficult for many individuals and families to find affordable coverage. For more than 10 months out of the year, people cannot buy ACA plans, and coverage for those who enroll during that open season does not take effect until January. STLDI, on the other hand, can be bought at any point in time, with the coverage often beginning immediately. Given the modern workforce and the large number of people being removed from Medicaid, restricting STLDI plans inflicts untold harm, particularly on the sick, without any benefit. It would worsen Americans’ health and financial well-being. As such, we strongly urge you to withdraw this rule.
Also today, Paragon put out an empirical analysis of the Affordable Care Act (ACA) individual market, comparing key trends between states that fully permit STLDI and states that severely restrict or ban STLDI. This analysis tests a critical hypothesis used in the Biden administration’s rationale for restricting short-term plans—that healthy people navigate to STLDI and leave a less healthy ACA risk pool with worse expected results (lower enrollment, fewer insurers offering coverage, and higher premiums).
This hypothesis is completely at odds with the evidence. I found that the ACA individual market, regardless of metric, has performed much better in states that fully permit STLDI. Between 2018 and 2023:
- Exchange enrollment was up 62.7 percent in STLDI favorable states, more than 13 times greater than the 4.7 percent increase in STLDI unfavorable states.
- The number of insurers selling exchange plans in STLDI favorable states increased 105 percent, more than three times the 32 percent increase in STLDI unfavorable states.
- Exchange plan premiums, particularly for benchmark plans and gold plans, decreased much more significantly in STLDI favorable states.
As I write in the paper, “this evidence suggests that states that restrict STLDI harm their ACA individual markets. This could happen for a few reasons, including that such restrictions cause overall competition in the state insurance market to decline, leaving less attractive plans, and because longer-term STLDI means that people who develop expensive conditions stay out of the ACA markets for longer.”
Ultimately, the relative strength of the ACA market in STLDI favorable states provides further evidence that the Biden administration should withdraw its proposed rule to restrict STLDI. The costs of such restrictions would dwarf any benefits.
The comment period runs through September 11. On September 11th, I will be at Cato for a policy forum, Short-Term Plans: The Battle for Health Insurance Choice, discussing the issue with Cato’s health policy director Michael Cannon. You can register for that event here.
All the best,
Paragon Health Institute