What Is the Impact on Enrollment and Premiums If the Duration of Short-Term Health Insurance Plans Is Increased?

Issue

Short-term health insurance policies are inexpensive, limited-duration plans that provide few consumer protections. Two factors—a 2018 federal rule to extend the terms of these plans from three months to up to 12 months, and the repeal of the individual mandate penalty—could cause healthy people to leave the ACA-compliant market and premiums in that marketplace to increase.

Goal

To determine the effects of these policy changes on health insurance enrollment and premiums.

Methods

Using the RAND COMPARE microsimulation model to analyze the effect of extending short-term plans and repealing the individual mandate, both individually and in combination.

Findings and Conclusions

Extending the duration of short-term plans has little effect on premiums and enrollment alone. Repealing the individual mandate in addition to extending the duration of short-term plans leads to fewer young people enrolled in ACA-compliant plans; overall, it reduces enrollment in minimum essential insurance coverage by 6 million and leads to a 0.9 percent increase in ACA marketplace premiums. However, when behavioral factors (e.g., lack of consumer awareness of short-term plans, hassle of enrolling, desire to comply with law) are removed, we estimate that 5 million people will enroll in short-term plans, and ACA-compliant premiums will increase by 3.6 percent.