The Biden administration announced Thursday that it has finalized a new regulation that restricts the use of short-term health insurance plans that do not comply with the Affordable Care Act, reversing the Trump administration’s move to give consumers greater access to lower-cost but cheaper plans.
Under the new rule, short-term programs will only be able to last for 90 days, with the possibility of a one-month extension.
In 2018, the Trump administration issued a rule allowing plans to last just under a year, renewable for a total of up to three years. Previously, under an Obama-era policy, plans had to last less than three months.
The plans, often with lower premiums than those found in the Affordable Care Act marketplaces, do not have to cover people with pre-existing conditions. They are also exempt from the health law’s requirement that plans offer a minimum set of benefits, such as prescription drug coverage and maternity care.
Democrats deride the so-called short-term, limited-duration plans as “junk” insurance, and the Obama-era policy was intended to ensure that healthy consumers couldn’t use that option to bypass Affordable Care Act purchases, leaving a sicker pool of clients enrolling in the comprehensive programs offered under the health law.
The White House put the new rule in place as a way to fortify the markets. In a briefing with reporters Wednesday, Neera Tanden, President Biden’s domestic policy adviser, said 45 million Americans are now covered through purchasing or expanding Medicaid under the Affordable Care Act. More than 20 million people signed up for plans in the marketplaces during the most recent open enrollment period.
“President Biden is not taking his foot off the gas,” Ms Tanden said.
Proponents of short-term plans said the less expensive options are suitable for people who can’t afford a purchase plan. Brian Blase, who worked on the 2018 rule as a White House official under President Donald J. Trump, said the plans were also ideal for contractors and the self-employed, including those with incomes too high to qualify for more generous subsidies in the Affordable Care Act;
Mr. Blase said the new rule could make insurers offering purchase plans face less competition. Sick consumers who buy a three-month plan could also lose coverage without a better immediate option, he added.
“No one benefits,” he said.
But critics of the short-term plans have warned that insurers can mislead consumers who enroll in them, including people who may be eligible for free coverage through the Affordable Care Act’s marketplaces. The new regulation requires insurers to provide a disclaimer explaining what short-term plans cover.
In its announcement Thursday, the White House cited a Montana man who racked up more than $40,000 in health care costs because his cancer was ruled a pre-existing condition and a Pennsylvania woman who underwent an amputation and received about $20,000 in bills she planned. would not cover.
Sabrina Corlette, research professor at Georgetown University’s Center for Health Insurance Reform, said the plans were often prominently displayed when consumers searched online for health insurance, with misleading ads.
“Often the marketing materials say they cover hospitalization and prescription drugs,” he said. “For the average consumer, it looks like a real health insurance plan.”
Georgetown researchers conducted a so-called secret shopper study last year, calling 20 sales representatives to ask about health plans for people who had lost Medicaid coverage and were eligible for free-market plans. They found that none of the representatives mentioned the availability of the free plans. Brokers often used aggressive and deceptive tactics to sell short-term plans without providing written information about the plans, investigators found.
Ms. Corlette said brokers typically received higher commissions for selling short-term plans than for more comprehensive options.
As a consumer, he said, “you have to be so smart and careful.”
After the Trump administration issued its rule in 2018, some states moved on their own to restrict the sale of short-term plans. Democratic lawmakers urged the Biden administration to rescind the regulation, and the administration issued a proposed rule to do so last summer.
