Health care may not feel like a top-tier political issue these days. The big fights over the Affordable Care Act (aka “Obamacare”) appear to be over. The same goes for the debate about the Democrats’ prescription drug initiative, which President Joe Biden signed into law in 2022.
But there are still plenty of ongoing disputes worth following — both because they affect millions of Americans and because they are a window into some of the most important philosophical differences between the two parties.
Case in point: The Biden administration announced last week that it is rewriting the rules for what’s known as ”short term” health insurance. Democrats say the changes are necessary to protect people from junk coverage that could leave people stuck with staggering medical bills. Republicans say the new limits will take away cheap coverage options some people prefer.
That argument should sound familiar, because it’s the same basic fight Democrats and Republicans always have when it comes to health care and social welfare: How aggressively should the federal government intervene in markets, in order to protect people from risk and guarantee a level of economic security?
Of course, in this particular case the debate has one other bit of relevance. The rules the Biden administration is rewriting were put in place by the Trump administration. That makes this argument more than just an illustration of what the two parties think. It’s also a concrete, real-life example of the very different ways the current president and his most likely 2024 challenger govern.
A Vestige Of Pre-Obamacare Insurance
One way to understand the new rules and the arguments behind them is to step back and remember how the Affordable Care Act changed American health care ― for better or worse, depending on your perspective.
A big goal was to reform the individual insurance market that consists of contractors, part-time workers and anyone else buying private coverage without an employer. In the old days, these people frequently couldn’t find or couldn’t afford comprehensive health plans, because insurers could charge more or deny coverage to people with preexisting conditions.
What’s more, the available plans frequently had big gaps in benefits. If you got sick, you might discover the insurer stopped paying once the bills got big. And that’s if the insurer covered your expenses at all. Some companies had a habit of looking back and deciding, after the fact, that whatever ailment you developed was there before and thus not their responsibility to cover.
The Affordable Care Act changed this by introducing new rules. Going forward, health plans had to include a set of “essential” benefits, free coverage of preventive care and limits on out-of-pocket spending. And they had to be available to everyone, at uniform prices, regardless of preexisting conditions. Selling non-compliant health insurance became illegal.
The law made an exception for “short term/limited duration” plans, which insurers had long offered as bridge insurance for people with brief coverage lapses — say, because they were between jobs. But it allowed the federal government to regulate these plans and the Obama administration did just that, limiting them to just three months at a time with an option to renew for up to a year. The Obama administration also required insurers to be clearer about what these policies did and didn’t cover.
Insurers sold policies under those rules and found a niche market, with the best available estimates putting the number of customers somewhere between a few hundred thousand and 3 million people. (The range is wide because nobody keeps reliable figures on these policies.)
A big selling point was that in some circumstances they offered lower premiums, mainly because they were only available to people in relatively good health — and because they didn’t have to cover as many services.
New Rules ― And New Surprise Bills
Enter the Trump administration and its determination to repeal the Affordable Care Act, including all of the law’s rules for health insurance. When that effort failed, Trump officials saw a way to get at the same goal through regulation. They could loosen the rules on short-term plans, allowing people to buy and hold them for up to three years, making them a seemingly viable substitute for Affordable Care Act policies.
Except of course they weren’t a true substitute, because they didn’t have the same coverage guarantees; one study found a majority of the plans had no prescription drug coverage, for example. There were widespread stories of people buying these policies and getting stuck with huge medical bills — and in many cases, it was clear the people who purchased the plans didn’t even realize they were buying policies with such gaps.
This didn’t happen by accident. Carriers pushed the policies aggressively, through advertising and telemarketing, playing up the low premiums and playing down the caveats about coverage limits ― if they mentioned them at all. In a “secret shopper” study by the General Accounting Office, a quarter of would-be insurance buyers got deceptive information about what short-term plans would actually cover.
As The Washington Post’s Catherine Rampell noted this week, “people often don’t realize they’ve bought a worthless product until it’s too late — when they get hit by a bus, say, or are diagnosed with a brain tumor.”
The Biden administration cited these problems last week when it announced new rules for short-term plans that, in effect, reverse what Trump did. Under the new regulations, insurers have to advertise coverage limits more clearly — and limit the plans themselves to just three months, with a possibility of just one month of extension.
The new rules will also restrict how insurers can market “indemnity” plans, to make clear that those plans ― which offer limited sums of cash to people when they get sick ― are not a substitute for comprehensive health insurance, which pays bills directly and without such limits on dollar amounts.
The rules are not yet final. There’s a 60-day period for public comment, after which the administration must review and address them. But the expectation is that the administration will forge ahead, with something closely resembling these rules taking effect late this year or early next.
“I think [the Biden administration] did a really good job of focusing on the underlying problem,” Sabrina Corlette, a Georgetown research professor and director of the Center on Health Insurance Reforms, told me. “A lot of consumers have been taken in by marketing materials, confused into buying these products and thinking they are a substitute for real insurance, and then gotten a rude shock when they actually had to use health care services and suddenly got a really big bill.”
The Debate About Universal Health Insurance
Short-term plans still have their strong supporters. Among the best-known fans is Brian Blase, who as a top Trump administration official helped write the rule that the Biden administration is now in the process of reversing.
Blase told me that when he returned to the private sector, he picked a short-term plan for him and his family because he thought it offered better coverage overall, taking into account premiums and deductibles ― and because it offered a much wider choice of which doctors and hospitals he could visit. Plans available through the Affordable Care Act, he noted correctly, frequently have small networks because it helps them to hold down their costs.
“I was still open to purchasing [a more regulated policy] until I started calling providers in Florida and very few took the ACA plan,” said Blase, who is now president of a think tank called the Paragon Institute. “So, I enrolled my family in a 12-month short-term plan.”
Blase argued that the warnings put in place during the Trump administration make clear what the policies do and don’t cover ― especially for consumers who buy through online brokers that make comparisons of premiums, deductibles and so on easy.
Michael Cannon, director of health studies at the Cato Institute, agrees that concerns over confusion are overblown, arguing that confusion is endemic to all coverage, not just short-term plans.
“Few consumers will ever have full information,” Cannon said. “Every health insurance plan will have enrollees who didn’t understand what they were getting.”
Proponents of the new rules agree that few consumers have full information. But they think that lack of knowledge only strengthens the case for tighter rules on what insurers can and can’t do. They also note that coverage through the Affordable Care Act is less expensive than it was a few years ago, thanks to extra financial assistance that Biden and the Democrats put in place last year.
“Things are really different now,” Sarah Lueck, vice president for health policy at the Center on Budget and Policy Priorities, told me. “And the more that these kinds of shadow markets are allowed to exist, and pretend that they’re offering a choice on the same footing [as the ACA], the fewer people are going to realize what’s really out there ― that they can get coverage that really protects them.”