If you have health insurance through your employer, you probably glossed over news stories this summer about the Trump administration’s new rules to expand the availability of “short-term” health insurance plans. These plans are used by a few million people. But they could negatively affect everyone who uses hospitals.
The “easier rules” extend the allowable length of these plans from 90 days to one year, with renewals extending the total coverage period to 36 months. Insurers offering these packages can choose not to cover pre-existing conditions, or can charge higher premiums for consumers who have chronic diseases.
To people who must buy their own insurance, like small business owners or contract workers, short-term insurance plans can seem attractive because they can be one-third cheaper than plans on state marketplaces created by the Affordable Care Act. Why the lower price? Insurers who sell these plans don’t have to offer coverage for all of the services that marketplace and employer-provided plans must offer. A recent Kaiser Family Foundation survey showed that 43 percent don’t cover mental health services, 71 percent don’t cover prescription drugs, and none cover maternity care. And unlike marketplace and employer plans, short-term plans can deny customers coverage based on pre-existing conditions.
Proponents of the plans tout their lower costs, while critics say they leave patients paying for insurance that actually covers little.
I, like many readers, am fortunate to have adequate health insurance through my employer. People who are self-employed must make some difficult insurance choices. If their income is high enough to disqualify them from marketplace subsidies for buying insurance, they can buy a marketplace plan with no subsidies, costing an average of $10,500 a year for a single person; buy a cheaper but skimpier short-term plan; or gamble and not buy any coverage at all.
Those of us with employment-related health insurance should care about policies affecting the few million people stuck between a rock and a hard place when buying health insurance because they use the same hospitals we do.
By law, hospitals must treat uninsured or underinsured patients. The cost of this “uncompensated care” reached $38.3 billion in 2016. That’s a huge drain on hospital resources. A recent report estimated that each uninsured patient costs a hospital $800 in uncompensated costs. People with short-term insurance function as uninsured when they seek treatment for conditions their policies don’t cover, such as childbirth, heart attack, or emergency psychiatric care.
That report also showed that competition among hospitals prevents them from passing uncompensated care costs on to their privately insured patients in the form of higher prices. Instead, uncompensated care erodes hospitals’ financial strength. As hospitals struggle financially, the quality of care they provide declines. Virginia Commonwealth University researchers found that hospitals in worse financial condition had significantly higher rates of adverse incidents for patients, such as bedsores or hospital-acquired infections. Another study found that patients undergoing major surgery faced significantly higher odds of suffering from medical errors when hospital margins decline over time.
If, like most Americans, you don’t use short-term health insurance, it may be tempting to ignore the debate about these plans. It may be even more tempting to think that they provide people with a helpful alternative to otherwise expensive health insurance. But the odds are good that you or someone in your family will need hospital care, meaning that a policy move in Washington that seems unrelated to you could matter to you more than you might think.
Vivian Ho, Ph.D., is a member of the Texas Medical Center Health Policy Institute’s executive advisory committee. She is also the chair in health economics at the Baker Institute for Public Policy, director of the Center for Health and Biosciences, and professor of economics, all at Rice University, and professor of medicine at Baylor College of Medicine.