Alternative Health Plan Popularty
The COVID-era expanded ACA tax subsidies were allowed to expire after 2025. Under the second Trump administration, rules governing the sale of short-term and fixed-indemnity health insurance plans have also been relaxed. Many attribute these two factors to the rise in popularity of so-called "alternative health plans"—those that do not provide comprehensive coverage as mandated by the ACA and are also not subject to ACA standards. As such, these plans are not required to provide essential health benefits under the ACA and are also permitted to impose annual or lifetime caps on benefits.
We asked two professors and authors of Tax Facts with opposing political viewpoints to share their opinions about the rising popularity of alternative, non-ACA compliant health plans.
Below is a summary of the debate that ensued between the two professors.
Their Votes:
Their Reasons:
Byrnes: It's always a positive to have more options when it comes to health insurance coverage. The fact is, not all Americans need expensive comprehensive health coverage. Many Americans are turning to short-term insurance plans and fixed indemnity plans that only cover certain services because they're lower-cost alternatives that provide the coverage levels that they feel they need. A lower-cost health plan isn't necessarily a bad plan--they simply allow American consumers to pay for the health coverage they actually need and want.
Bloink: These so-called "alternative" health insurance plans are often referred to as "junk insurance" for a reason. They really provide very little coverage at all. The insurance companies that sell them have broad discretion to deny claims and impose significant caps--and most don't provide essential health coverage in the first place. Most taxpayers who purchase these limited coverage plans don't actually realize how limited the coverage is--until they need health coverage the most.
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Byrnes: Banning these alternative health coverage solutions entirely would only serve to drive up the uninsured rate in our county. Taxpayers who truly need assistance in paying for insurance can still qualify for ACA premium tax credits if they wish to purchase comprehensive coverage. Many taxpayers who purchase alternative insurance coverage do so to bridge gaps or because they've decided to prioritize spending in other areas--and that should be each American's right.
Bloink: The fine print on any type of health insurance plan can be incredibly difficult to understand. Most alternative plans provide no prescription drug coverage. Americans who purchase alternative plans often have no real way to fully understand what is covered and what is not. The ACA marketplace provides a solid option to allow individuals to compare plans and evaluate their coverage needs—all while ensuring the plans offered provide robust coverage.
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Byrnes: We no longer mandate comprehensive coverage at the individual level for a reason. Every American should have the right to choose how to spend their hard-earned dollars. Taxpayers who don't qualify for government assistance—because their income levels are higher—have a choice. They can allocate their dollars to comprehensive coverage or purchase less expensive coverage to suit their needs. The federal government shouldn't prevent Americans from making their own choices in this arena.
Bloink: The fact is, all of us will eventually require medical care. Those with non-comprehensive coverage who need the care and can't pay for it can wind up with tens of thousands of dollars in debt--and no viable way to ever pay it down. The more big-picture issue is that these plans give healthier Americans a way to get cheap, albeit extremely limited, insurance—meaning that the percentage of sicker people in the comprehensive insurance market rises. When that happens, health insurance prices increase for everyone—and they'll only continue to rise with this system.