The U.S. Department of Health and Human Services issued a proposed rule that such plans, now available only for periods of three months or less, will be available for up to 12 months. The agency is considering whether these plans will be renewable.
The plans will not include the benefits that define the insurance created under Democratic former President Barack Obama, including required health benefits such as maternity coverage and the guarantee of insurance regardless of health.
Obamacare currently allows for such short-duration plans, but they are limited to three months. The agency said it expects 100,000 to 200,000 people to shift from an Obamacare plan to such insurance in 2019 when the rule would go into effect, but that millions more people who have no insurance will likely sign up.
Health and Human Services Secretary Alex Azar, who began serving in his post less than a month ago, said in his first media briefing on Tuesday that the proposed rule marked “an important first step.” He said the administration is working on additional policies aimed at providing cheaper health insurance options for consumers.
America’s Health Insurance Plans, the biggest U.S. health industry lobby, said it was concerned the expansion would make it more expensive to cover the sicker people, particularly those with pre-existing conditions, who remain on the Obamacare marketplace. About 10 million people are enrolled in Obamacare plans that are eligible for income-based subsidies.
Evercore ISI analyst Michael Newshel said in a research note that while the magnitude of the new rule’s impact is debatable, directionally it is “another negative more for the stability of the individual insurance market.”
Even so, there were no new negatives in the government rule proposal, Newshel said.
The premiums on the plans have been rising each year since the marketplace was launched and increased in the double digits in 2018, reflecting a costly pool of members, fewer insurers and less competition, and the government decision to pull back billions of dollars in payments to insurers.
Republican President Donald Trump last year issued an executive order requiring the agency, which oversees the Obamacare individual market, to propose such a rule as part of its goal to make health insurance more affordable. The order also required an extension of association-based health plans that do not comply with Obamacare and more use of tax-free health savings accounts.