President Donald Trump's insurance proposals come shortly after the GOP tax overhaul scrapped Obamacare's individual mandate starting in 2019. | Manuel Balce Ceneta/AP Photo Trump proposal boosts skimpy insurance plans, again undercutting Obamacare

The Trump administration is proposing to expand the availability of short-term health insurance plans that some deride as “junk insurance” — an effort that could give consumers cheaper coverage options but undermine Obamacare's marketplaces and popular protections for pre-existing medical conditions.

Proposed rules issued this morning follow an executive order from President Donald Trump this fall seeking to expand access to more affordable health insurance alternatives to comprehensive, but pricey Obamacare plans. The HHS proposal, released weeks after the Trump administration issued a rule encouraging small businesses to find coverage outside the Affordable Care Act marketplaces, represents the administration's latest effort to unwind the health care law with repeal efforts stalled in Congress.


"We need to be opening up more affordable alternatives," Health and Human Services Secretary Alex Azar said on a call with reporters today. “Today’s action represents an important promise kept by the president.”

But many health care experts fear expanding the availability of the health plans, which are exempt from Obamacare's robust consumer protections, could further destabilize the law's wobbly insurance markets. Critics say the plans offer just the illusion of coverage, and enrollees often don't realize how limited their benefits are until it's too late.

Short-term plans maintain cheaper prices than traditional insurance by refusing coverage for pre-existing conditions, in some cases, and some medical services. Unlike Obamacare coverage, the short-term plans typically cap payouts, which could leave enrollees with catastrophic illnesses or injuries on the hook for huge medical bills

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“The way that you get to lower premiums is to reduce benefits,” said Kevin Lucia, a professor at Georgetown University’s Center on Health Insurance Reforms. “It’s a quick fix, but ultimately those products don’t help consumers who need them.”

The new rules are a reversal of the Obama administration's efforts to limit short-term plans. It reduced the plans’ maximum length from one year to three months, hoping to steer more people into comprehensive Obamacare coverage.

The new proposal from Trump's health, labor and treasury departments would restore the 12-month limit on short-term plans. The administration projects that between 100,000 and 200,000 individuals now in Obamacare plans would instead opt for short-term plans in 2019.

“You’ll get such low prices for such great care,” Trump said at the signing of his October executive order on health care. “It should have been done a long time ago.”

Supporters of short-term plans say they are an affordable insurance option for people who don't want robust coverage and have been priced out of the individual market — especially middle-income customers who don't qualify for Obamacare's insurance subsidies. The Trump administration on Tuesday pointed out that the number of individuals purchasing plans without subsidies fell by 2 million, or nearly 25 percent, between 2016 and 2017, and one in four customers had access to just a single insurer selling coverage this year.

"Basically what they're doing is giving people options who are already trying to jump off the ship," said Edmund Haislmaier, a health policy analyst at the conservative Heritage Foundation.

UnitedHealthcare, which withdrew from the Obamacare marketplaces after mounting financial losses, was "excited" by Trump's health care executive order, chief financial officer Dan Schumacher said on an investor call in October. He cited the company's history of selling short-term plans and touted it as an attractive option for people "in between coverage."

The Trump administration last month also proposed expanding the availability of association health plans, in which small businesses and self-employed individuals band together to purchase coverage. The association plans are exempt from some Obamacare rules, such as the requirement to cover a set of 10 health benefits the law deemed "essential," including prescription drugs and emergency care.

Trump's insurance proposals come shortly after the GOP tax overhaul scrapped Obamacare's individual mandate starting in 2019. The administration is also taking steps to expand exemptions to coverage requirement while it's still in effect this year.

Taken together, the administration's moves are expected to weaken the law's insurance marketplaces since individuals with few medical needs are likely to gravitate to the cheaper coverage. That would leave a disproportionately sicker, more expensive population in the Obamacare plans, further driving up already-rising premiums. Most low-income Obamacare customers would be protected from the resulting premium increases thanks to the law's hefty insurance subsidies, meaning the marketplaces likely can still survive.

“There won’t be a death spiral, but the people who really lose in that scenario are basically middle class people who are sick," said Michael Miller, policy director of consumer advocacy group Community Catalyst.

States supportive of Obamacare are likely to take steps to curb the proliferation of short-term and association plans. In California, for example, state lawmakers this year have already offered legislation that would prohibit the sale of short-term plans.

The proposed rule will be open for comments until April 23.

Rachana Pradhan contributed to this report.

