The Biden administration announced on Thursday that it had finalized a new regulation that restricts the use of short-term health insurance plans that do not comply with the Affordable Care Act, reversing a move by the Trump administration to provide consumers with access to cheaper but less comprehensive plans.
Under the new rule, short-term plans can only last for 90 days, with an option for a one-month extension.
In 2018, the Trump administration allowed the plans to last for nearly a year, with the possibility of renewing them for up to three years. Before that, under an Obama-era policy, the plans were required to last for less than three months.
These plans, often with lower premiums compared to those on the Affordable Care Act’s marketplaces, are not obligated to cover individuals with pre-existing conditions and are exempt from providing a minimum set of benefits required by the health law, such as prescription drug coverage and maternity care.
Democrats criticize the short-term, limited-duration plans as “junk” insurance, as the Obama-era policy aimed to prevent healthy consumers from bypassing the Affordable Care Act’s marketplaces, resulting in a higher number of sick individuals enrolling in the comprehensive plans offered under the health law.
The White House views the new rule as a way to strengthen the marketplaces. Neera Tanden, President Biden’s domestic policy adviser, stated that 45 million Americans are covered through the marketplaces or Medicaid expansion, with over 20 million enrolling in plans during the recent open enrollment period.
Supporters of short-term plans argue that these more affordable options are suitable for those who cannot afford marketplace plans, particularly contract and self-employed workers. Brian Blase, who worked on the 2018 rule under President Trump, mentioned that the plans are also beneficial for individuals ineligible for generous subsidies on the marketplaces.
Critics of the short-term plans caution that insurers may mislead consumers, including those eligible for free coverage through the marketplaces. The new regulation mandates insurers to provide a disclaimer outlining what the short-term plans cover.
The White House mentioned a man in Montana who incurred over $40,000 in health costs due to his cancer being considered a pre-existing condition, and a woman in Pennsylvania who faced roughly $20,000 in bills for an amputation not covered by her plan.
Sabrina Corlette, a research professor at Georgetown University, highlighted that short-term plans often appear prominently in online searches for health insurance, accompanied by deceptive advertising.
Georgetown researchers conducted a study revealing that sales representatives failed to mention free marketplace plans to individuals eligible for them, resorting to aggressive and misleading tactics to sell short-term plans without offering written plan information.
Critics stress that brokers gain higher commissions for selling short-term plans compared to comprehensive options, underlining the importance for consumers to be vigilant.
Following the issuance of the 2018 rule under the Trump administration, certain states took action to restrict short-term plan sales. Democratic lawmakers urged the Biden administration to reverse the regulation, leading to a proposed rule last summer.