Why deregulating limited-coverage plans erodes the ACA

Court

A recent federal appeals court decision has the potential to harm consumers while risking a key protection of the Affordable Care Act, according to a Bloomberg editorial.

Earlier this month, an appellate court ruled the Obama administration “colored outside the lines of its authority” by regulating low-cost, limited-coverage health plans. Congress, too, is trying to impede the policy goal of ensuring everyone’s health plans provide adequate coverage, the editorial argues.

These health plans are problematic, the piece says, because consumers who buy them risk incurring tax penalties for lacking comprehensive coverage and when they need healthcare services, the plan doesn’t go as far as they thought.

An ACA loophole allowed the limited health plans to flourish until 2014 when the regulations changed. The new regulations said the plans could only be purchased by people who already had minimum essential coverage and wanted some extra protection.

But the U.S. Court of Appeals for the District of Columbia upheld a lower court’s ruling that the Department of Human and Health Services “overreached” its authority by implementing the new regulations.

Defining necessary features for health coverage helps contain healthcare costs, the Bloomberg piece argues. When young people opt for limited coverage indemnity plans, they put upward pressure on the price of adequate insurance plans by leaving the risk pool. The higher cost of insurance spreads to older policyholders and insurers alike.

Further, the minimum requirements help buyers in the ACA marketplace comprehend the benefits of different plans. In understanding the different levels of coverage, consumers can adjust how much they value different plans, paving a path for competition between insurers to drive down prices.

- read the Bloomberg editorial

- check out the federal appeals court ruling