Health insurance is complicated. In many states, it’s about to get worse.

That’s the opening of a piece of mine in the Wall Street Journal (gated, unfortunately) about what states should do in response to the Trump administration’s anticipated relaxation of rules governing short-term plans.

Where states allow short-term plans without restriction, the plans will be a lot cheaper than those sold on the exchanges because they don’t have to comply with the ACA. But that low price comes with big tradeoffs.

Short-term plans don’t have to sell to all comers, nor do they have to cover pre-existing conditions. Sick people will have no real choice but to buy insurance on the exchanges. To cover the medical costs of a relatively sicker group of people, exchange insurers will have to increase their premiums.

People who earn less than four times the poverty level will be shielded from the price increases because the ACA caps premiums at no more than about 10% of income. The federal government, however, has to pick up the rest of the tab-so as prices go up, federal outlays will, too, squandering an estimated $38.7 billion over 10 years.

Hurt worst will be people who earn more than four times the poverty level. Federal actuaries estimate that they’ll pay 6% more on account of the short-term rule by 2022. That will come on top of price increases associated with Congress’s repeal of the individual mandate. In 2019 alone, the Urban Institute predicts that insurance prices will grow, on average, by about 18%.

Beyond that, people who buy short-term plans may be surprised to discover just how stingy they are. Insurance is complicated: people rarely read, much less understand, all the fine print. And there’s a lot of fine print.


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