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Brief Examines Efforts to Create Health Plan Options that Don’t Comply with the Affordable Care Act’s Rules

Though Congress last year failed to repeal key Affordable Care Act requirements for non-group health insurance that people buy themselves, the Trump Administration and some states are promoting other types of plans through regulatory changes that would allow the sale of products that skirt many of the ACA’s requirements.

A new Kaiser Family Foundation brief examines four of those options and the tradeoffs involved if such loosely regulated markets take root as an alternative to the ACA-regulated market, particularly as the repeal of the individual mandate penalty takes effect next year. These four options are:

  • Short-term, limited duration health insurance policies. Earlier this year, the Trump Administration proposed draft regulations to promote broader use of these plans, which typically deny coverage for pre-existing and do not cover all of the ACA’s required benefits.
  • Association health plans. In separate regulations, the Trump Administration proposed a new type of association health plan that individuals who are self-employed could purchase. These plans would not be required to cover the ACA’s essential health benefits and could vary premiums based on gender, occupation and other factors that ACA plans can’t use.
  • Idaho’s proposal for new state-based health plans. The state of Idaho in January issued a bulletin to allow a new type of individual health insurance product to be sold in the state that could charge higher premiums to people who are sick and would offer fewer benefits with greater cost-sharing requirements than the ACA would otherwise permit.
  • Farm Bureau health plans exempt from state and federal regulation. An Iowa law enacted in April would permit the state’s Farm Bureau to sell health coverage outside of existing federal and state insurance regulations as the product is by definition not considered health insurance. The Tennessee Farm Bureau already sells such products under a 1993 law there.

Each of the four plan options would create parallel insurance markets with different and more limited consumer protections, resulting in lower premiums but less coverage and financial protection for those who are able to enroll. In many cases, these plans also could bar or discourage people with pre-existing conditions from enrolling, leaving the ACA-regulated individual market with a pool of relatively sicker enrollees that would require further premium increases.

About half of people in the current ACA-regulated market (including the vast majority who sign up through the marketplace) receive tax credits that would shield them from such premiums increases, providing some stability in the ACA market. However, middle-income people who are not eligible for tax credits, and who have pre-existing conditions, will not have any meaningful new coverage options under any of these proposals and could find their ACA individual insurance that covers essential benefits and pre-existing conditions growing more expensive, potentially pricing them out of affordable coverage altogether.