How CBO and JCT Analyzed Coverage Effects of New Rules for Association Health Plans and Short-Term Plans
This report describes the methods used to assess how the new rules would affect the number of people who obtain health insurance and the costs of federal subsidies for that coverage. It also provides details about those projected effects.
During the summer of 2018, the Administration issued final rules governing coverage offered through association health plans (AHPs) and short-term, limited-duration insurance. (AHPs are legal arrangements that allow associations or unrelated employers to jointly offer fringe benefits to members or employees.) The rules were designed to increase enrollment in such plans, which may be sold in the small-group and nongroup insurance markets. AHPs and short-term plans are exempt from many of the regulations that govern other insurance offerings in those markets.
This report describes how the Congressional Budget Office and the staff of the Joint Committee on Taxation (JCT) analyzed the new rules and determined how those rules would affect the agencies’ projections of the number of people who obtain health insurance and the costs of federal subsidies for that coverage. It also provides details about the projected effects.
CBO and JCT’s current findings are similar to those from an analysis of the two rules as they were proposed. Those findings were published in a report on federal subsidies for insurance coverage that CBO released with its spring 2018 baseline.
The agencies’ two main findings from the current analysis are as follows:
Each year over the next decade, roughly 5 million more people are projected to be enrolled in AHPs or short-term plans as a result of the two rules. Almost 80 percent are people who would otherwise have purchased coverage in the small-group or nongroup markets. The remaining 20 percent (roughly 1 million people) are projected to be newly insured as a result of the rules.
Once the two rules take full effect, premiums for coverage in the fully regulated small-group and nongroup markets are projected to be roughly 3 percent higher than they would have been without the rules. In 2028, for example, such an increase would raise average annual premiums by roughly $350 to $400 for single coverage and by $900 to $950 for family coverage. Premiums for fully regulated coverage are projected to rise because people who continue to purchase coverage in the fully regulated markets are expected to have higher average health care costs than those who purchase AHPs or short-term plans. Because federal subsidies defray some of the higher costs, CBO and JCT do not expect that premium increase to spur a noticeable decline in insurance coverage.