Wednesday, July 19, 2023

Proposed Biden Regulation Won’t Eliminate “Junk” Insurance — It Will Promote It

While Congress was on its Independence Day recess, the Biden administration released a proposed regulation it claimed would “protect consumers from scam insurance plans and junk fees.” In reality, it does just the opposite.

Consistent with the left’s definition of “consumer protection” as “a regulation that protects (i.e., prohibits) an individual from being a consumer,” the proposed rule would shut down a form of health coverage that competes with Obamacare-style plans. As a result, the rule would shift more people onto the Obamacare exchanges — the real form of junk insurance.

New Regulation Repeals a Trump Reform

The proposed rule would undo a regulation finalized by the Trump administration in 2018, as a result of an executive order Trump issued the prior October. That rule allowed for the sale of short-term, limited-duration insurance (STLDI) plans that last 12 months, along with renewals that could extend the initial contract to up to 36 months.

Changing the maximum length of an STLDI policy had an important effect because this type of coverage does not have to comply with all of the Obamacare insurance regulations — the same requirements that more than doubled the cost of individual insurance over just four years. In other words, by extending the maximum length of an STLDI policy, the Trump administration provided an off-ramp for people who considered Obamacare plans too expensive or did not want to buy that much coverage.

The Biden proposal would change the maximum duration of an STLDI plan to a three-month initial term and a total duration of four months per policy. This proposal largely mirrors the Obama administration’s actions, which shortened the maximum duration of STLDI from 12 months (the standard since this portion of federal law was created in 1996) down to three months, after STLDI emerged as a popular alternative to costly Obamacare plans once the exchanges launched in 2014.

To sum up the policy to-and-fro: The Obama administration cracked down on STLDI as soon as it discovered people were using it as an escape valve out of the exchanges; the Trump administration reopened that escape valve in 2018; and the Biden administration now wants to hammer that valve shut again.

Patronizing Health Care Paternalism

What mentality would lead the current administration to undo the Trump efforts and eliminate most of the market for this type of insurance? Consider this passage on page 146 of the proposed rule:

Consumers with low health literacy, which disproportionately includes consumers with low incomes, may also be misled into purchasing STLDI or fixed indemnity excepted benefits coverage under the mistaken impression that it would lower their out-of-pocket costs while providing comprehensive coverage with lower premiums.

The plain English translation: Poor people are stupid, and we need to protect them from themselves.

That patronizing mentality pervades the entire document. The word “literacy” appears 20 separate times, via references like the above one, talking about how people purportedly lacking health literacy might make a “bad” choice of which the powers that be do not approve.

When it comes to various types of health coverage, individuals should have the right to know exactly what they are buying before they buy it (i.e., transparency), but they should also have the right to buy the plan that works best for them — even if government bureaucrats don’t consider that the “correct” decision. That the administration thinks otherwise harks back to Ronald Reagan’s famous quote about the nine most terrifying words in the English language: “I’m from the government, and I’m here to help.”

The Real ‘Junk’ Insurance

By eliminating STLDI as a realistic option for many people, the proposed rule would throw more individuals back into the Obamacare exchanges, exposing them to the real form of “junk” coverage. Because these plans have to comply with all manner of mandates — the ones that those people “from the government” force on consumers — insurance companies have only two ways to control costs:

  1. Raise deductibles to well more than $5,000 for individuals and $10,000 for families. I know this problem well, paying more than $500 per month this year for a plan with a $6,350 deductible. In other words, I must pay nearly $13,000 out-of-pocket in premiums and deductibles before my “insurance” will pay so much as a dime.
  2. Create incredibly narrow networks of doctors and hospitals, such that many of the biggest and most well-known entities do not accept Obamacare plans. For instance, as of 2018, the Mayo Clinic did not accept any exchange plans within Minnesota.

The Obamacare plans are so terrible that even the exchange heads who sell this type of coverage refuse to buy it. Yet the Biden administration wants to force everyone else to purchase this “insurance,” even if people would prefer something different.

That sums up the Biden proposal in a nutshell — a little intellectual elite in a far-distant capital thinks it can plan our lives for us better than we can plan them ourselves. Forcing more Americans into “junk” insurance represents only the latest step in the left’s messianic mission to control the nation’s health care system, and much else besides.

This post was originally published at The Federalist.