Biden administration proposes rules to protect consumers from health ‘junk insurance’
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Key takeaways:
- Prior rules allowed short-term insurance products to be extended to a maximum of 3 years.
- Guidance was also issued to help protect consumers from surprise medical bills, which can range from $700 to $2,600.
President Joe Biden announced new proposals that aim to lower health care costs by reinstating limits on short-term insurance plans and addressing surprise medical bills and medical debt.
According to a White House press release, the proposed rule would close loopholes that allowed companies to offer misleading short-term health insurance products. The products — referred to by the Biden administration as “junk insurance” — could discriminate against consumers based on pre-existing conditions by claiming they are not covered, leaving consumers with little to no coverage and thousands of dollars in medical bills.
Previous regulations adopted in 2018 by the Trump administration allowed limited-duration health insurance plans to be extended to 3 years, according to the release.
If the new rules are finalized, insurance plans that claim to be short term would be limited to just 3 months, or a maximum of 4 months, if extended.
“These actions will reduce scam insurance plans that offer really no insurance at all,” the release said.
Health insurers that want to be exempt from the rules — “because they are designed to replace lost income when people get sick, rather than provide full medical coverage” — would have to make it clear that consumers would get a “defined benefit” instead of comprehensive insurance, according to the release.
ACP President Omar T. Atiq, MD, FACP, said in a statement that the organization had previously opposed the relaxed rules because the plans were meant to be “temporary stopgaps.”
“More needs to be done to ensure that all Americans are able to access affordable health care and health insurance; however short-term plans that leave enrollees with inadequate coverage were never the way to achieve this goal,” Atiq said. “ACP will continue to advocate with the administration, Congress and policymakers to make health care affordable and accessible for all Americans.”
In addition to proposing rules on short-term insurance, the Biden administration also issued guidance to help prevent consumers from surprise medical bills — which can range from $750 to $2,600 — clarifying that:
- health care services are either out of network and subject to the surprise billing protections or in network and subject to the Affordable Care Act’s annual limitation on cost-sharing;
- health plans and providers must be transparent about “facility fee” charges for services that are provided outside of hospitals, in addition to costs of other products or services they cover or provide; and
- nonparticipating providers and EDs cannot escape protections of the No Surprises Act by renaming facility fee charges.
Additionally, the HHS, Consumer Financial Protection Bureau and the U.S. Department of the Treasury issued a Request for Information to understand the emerging practice of providers signing patients up for third-party medical credit cards and loans. Such credit cards can possess teaser rates and deferred interest features that increase costs for consumers and are offered even when low- to-no-cost assistance or coverage options are available.
References:
- Fact sheet: President Biden announces new actions to lower health care costs and protect consumers from scam insurance plans and junk fees as part of “Bidenomics” push. https://www.whitehouse.gov/briefing-room/statements-releases/2023/07/07/fact-sheetpresident-biden-announces-new-actions-to-lower-health-care-costs-and-protect-consumers-from-scam-insurance-plans-and-junk-fees-as-part-of-bidenomics-push/. Published July 7, 2023. Accessed July 10, 2023.
- HHS news release: Trump administration delivers on promise of more affordable health insurance options. https://www.cms.gov/newsroom/press-releases/hhs-news-release-trump-administration-delivers-promise-more-affordable-health-insurance-options. Published Aug. 1, 2018. Accessed July 10, 2023.
- Internal medicine physicians pleased to see administration reinstate limits on short-term insurance and take steps to reduce costs for patients. http://www.acponline.org/acp-newsroom/internal-medicine-physicians-pleased-to-see-administration-reinstate-limits-on-short-term-insurance. Published July 7, 2023. Accessed July 10, 2023.
Perspective
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The Biden Administration should be applauded for taking concrete steps to protect the American public from short-term, limited-duration insurance (STLDI) plans, also known as “junk” plans.
Under the newly proposed rule, individuals would be able to have future STLDI plans for a maximum of only 4 months, down from a maximum of 3 years. In addition, if this rule is finalized, STLDI plans would have to clearly state that they do not provide comprehensive health insurance coverage, do not cover or may limit coverage of preexisting conditions and essential health benefits, do not qualify for federal financial help to pay for premiums, and do not protect against surprise medical bills, so that individuals who choose to sign up for these “junk” plans are fully aware of how little the plans cover.
Because STLDI plans are exempt from providing individuals with the consumer protections guaranteed by the Affordable Care Act and are not required to provide comprehensive coverage, they are not required to cover preexisting conditions, prescription drugs, laboratory services, preventive care or essential health benefits such as pediatric, hospital, emergency, maternity, mental health, and substance use disorder services. STLDI plans can also have high deductibles and restrictive caps on plan payouts, including daily and lifetime coverage limits, that often leave patients responsible for paying the balance of health care bills, which can amount to hundreds of thousands of dollars for hospitalizations or treatment of serious illnesses.
The timing of this proposed rule to regulate STLDI plans is important because millions of people across the country are currently losing health coverage due to Medicaid unwinding following the end of the COVID-19 public health emergency.
As individuals and families with limited financial resources and low health insurance literacy rates rush to find new forms of health insurance after losing Medicaid coverage, they may select STLDI plans that may appear cheaper than ACA comprehensive coverage plans without realizing how restrictive these “junk” plans are, placing them at risk for poorer health outcomes because of these plans’ limited access to essential health care. Low-income and minority communities are particularly susceptible to STLDI plans because they may not be able to afford comprehensive health insurance or may experience language or other barriers that prevent them from understanding that STLDI plans do not cover the services they may need.
Protections should be in place to ensure that the limitations and risks of STLDI plans are clearly stated, so that families do not experience financial ruin or lack of access to lifesaving health care from unknowingly signing up for “junk” plans.
It is, therefore, critical for the administration’s proposed rule to be finalized to provide the necessary oversight and regulation of STLDI plans and protect vulnerable communities from disproportionately enrolling in STLDI plans in order to prevent widening socioeconomic and racial/ethnic health disparities that may result from a lack of access to affordable and comprehensive care.
Note: The STLDI proposed rule is scheduled to be published in the federal register and open for public comment on July 12 and can be accessed here.
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