Biden administration limits short-term ‘junk’ health insurance
By Hayley Desilva / March 28, 2024
The Biden administration is instating tighter regulations on short-term, limited duration insurance plans.
The Health and Human Services, Labor and Treasury departments released final rules Thursday to decrease the maximum length of coverage on these types of policies from three years to four months, including renewals or extensions.
The plans are not subject to consumer protections set by the Affordable Care Act, which includes a requirement for policies to cover individuals with preexisting conditions.
Under the final rules, consumers cannot purchase short-term, limited-duration insurance plans issued by the same company within a one-year period. The rules also require an insurer to provide clear disclosures regarding coverage limits in all marketing, application, enrollment and re-enrollment materials.
“HHS is cracking down on junk insurance plans to help consumers make informed choices and avoid mistakenly paying for a plan that does not provide them the coverage or protection they expect,” HHS Secretary Xavier Becerra said in a news release Thursday.
The rules, proposed by the departments in July 2023, are scheduled to go into effect in June.
State regulators in September asked the federal agencies to reconsider the proposed rules, arguing that the policies were typically cheaper than plans following ACA requirements, that insurance brokers receive high commissions for selling these plans and that shortening the duration of these policies could cause insurance premiums to rise in the individual exchange market.
House Energy and Commerce Committee ranking member Frank Pallone (D-N.J.) applauded the Biden administration's move.
"These junk plans are a bad deal for consumers and oftentimes leave patients — who think they have real coverage and protection — saddled with thousands of dollars in medical debt," Pallone said in a news release Thursday.
In 2020, Pallone led a committee investigation into the practices of short-term insurance plans. The investigation found that across eight short-term insurers, several restricted coverage if a member had a preexisting condition and some published misleading marketing materials, according to a committee report.
Meanwhile, Senate Finance Committee ranking member Dr. Bill Cassidy (R-La.), voiced his opposition to the regulations.
"This new rule is what people hated most about Obamacare, taking away their choices and forcing Americans into a one-size-fits-all approach," Cassidy said. "In this case, the requirement will be to go from something cheaper to something more expensive. Americans want affordability."