“Renewable Term Health Insurance: Better Coverage Than Obamacare,” by Manhattan Institute Senior Fellow Chris Pope,shows this insurance option helps alleviate two of the most problematic features of Obamacare: community rating, in which premiums must be the same for everyone regardless of age and health status, and guaranteed issue, which requires insurers to raise premiums on everyone, including those who rarely make claims, in order to fund payouts for people with expensive preexisting conditions.
When Congress eliminated the Obamacare mandate that all individuals have health insurance, effective in 2019, it gave many people a chance to find more-affordable alternatives.
“The best way to understand this market is to think about it as restoring access to the types of insurance plans that existed before Obamacare,” Chris Pope told Health Care News. The ACA did not outlaw such plans but greatly restricted their pricing flexibility. In October 2018, the Trump administration deregulated STLDI, and today 16 states follow the full federal law while the remainder either prohibit the plans or restrict their term length and renewability.
STLDI can offer plans better tailored to the individual’s needs, and premiums can be lower because consumers don’t have to purchase coverage they don’t want or need. This has prompted some lawmakers to call them “junk insurance.” Pope states his study shows this to be false. “STLDI Plans cover a significantly larger share of medical costs than ACA exchange plans for the same premiums, and their availability will reduce the number of Americans without health insurance.”
In particular, STLDI offers customization. “You can pick your deductible, and you can pick your coinsurance rate, depending on your risk factors,” said Pope.
As for STLDI plans not having to cover mental health, substance abuse, and prescription or maternity benefits, as ACA-compliant plans must, many do carry these benefits, Pope says. It is important for consumers to understand what they are purchasing, he says.
A case in Philadelphia of a woman with a non-ACA plan which did not cover an emergency amputation and thus left her with a huge bill has received particular attention, but that was not an STLDI plan, Pope says.
“She had an indemnity plan, which is a plan that gives you cash up to a certain amount,” said Pope. “STLDI are required to cover the full cost of care.”
Pope says the criticism that STLDI will undermine the ACA exchanges and leave the nation’s taxpayers with a big bill to cover the sick is not accurate.
“The exchanges are really an entitlement in disguise, not an insurance market,” said Pope. “Seventy percent in Obamacare are receiving subsidies. So the plans are getting funding. The fact that people can find more affordable plans isn’t going to change the nature of the exchange.”
AnneMarie Schieber ([email protected]) is managing editor of Health Care News.
Chris Pope, “Renewable Term Health Insurance: Better Coverage Than Obamacare,” The Manhattan Institute, May 2019: https://heartland.org/publications-resources/publications/renewable-term-health-insurance-better-coverage-than-obamacare