Obamacare is the real ‘junk’ insurance

Vice President Kamala Harris extolled the president in a speech last month for “fighting to expand access to affordable healthcare” and lambasted right-wing “extremists” for “trying to take away healthcare coverage.”

So it’s ironic that one of the Biden administration’s latest moves, a rule cutting the maximum duration of a short-term health plan from three years to no more than four months, will take away health coverage on which millions of people rely. 

Democrats call short-term plans “junk” insurance. But that claim doesn’t hold up to scrutiny. As Cato Institute scholar Michael Cannon pointed out, the majority of short-term plans are comprehensive policies that cover high-cost medical events.

Short-term plans are simply less expensive than exchange coverage. That’s because they don’t have to comply with Obamacare’s cost-inflating mandates, including its requirement that they cover 10 “essential” health benefits, regardless of whether people want or need them. 

Short-term plans are also exempt from Obamacare’s mandate that premiums for the old be no more than three times what they are for the young. Older adults’ health costs tend to be even higher than that multiple. Consequently, many young people pay more for coverage through the exchanges than they would absent Obamacare.

Democrats use lavish premium subsidies to attract people to Obamacare’s exchanges. People who make less than $21,870 pay no premium. Those who make up to $43,740 must devote no more than 6% of their income toward premiums.

But even if taxpayer subsidies make exchange premiums cheaper than those for short-term plans, people still might be better off outside the exchanges.

That’s because exchange coverage tends to confine people to narrow provider networks. Nearly 8 in 10 exchange plans in 2020 had “restrictive networks” that offered limited to no out-of-network coverage, according to research from Avalere.

Short-term health plans, by contrast, can have “wider provider networks” than Obamacare, according to the nonpartisan Congressional Budget Office.

Exchange plans are also notorious for having high deductibles — the amount beneficiaries must spend out of pocket before their insurance kicks in. Deductibles for bronze plans, which must cover approximately 60% of enrollees’ health costs, have increased from roughly $5,100 in 2014 to more than $7,200 in 2024.

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Combine a narrow network with high out-of-pocket costs, and exchange coverage may not seem like it provides all that much value, even if taxpayers are picking up much of the premium.

Roughly 4.4 million people in 2023 were eligible for subsidized exchange coverage yet chose to remain uninsured. That’s a good indication that they do not find exchange coverage valuable. A short-term plan might offer them better value. Unfortunately, the Biden administration has taken that option away. 

Sally C. Pipes is president, CEO, and Thomas W. Smith fellow in healthcare policy at the Pacific Research Institute. Her latest book is False Premise, False Promise: The Disastrous Reality of Medicare for All (Encounter 2020). Follow her on X: @sallypipes.

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