Short-term health insurance that provides limited benefits and coverage from one month to three years might soon see major overhauls under the White House’s latest plan to rein in healthcare costs.
President Joe Biden last week proposed regulations to restrict short-term, limited-duration insurance (STLDI) policies to a maximum of four months and require plans to explain benefit limits to policyholders. The announcement came as part of a larger White House push to lower health costs and crack down on surprise medical fees.
The administration will take public comment on the proposal before finalizing it.
STLDI plans have gained in popularity—and drawn increased scrutiny—since 2018, when the Trump administration’s revised federal rules modified the definition of such coverage and extended the plans’ maximum duration from three months to almost a year, with the option to renew for up to three years.
Backers of the short-term health plans, which were initially created to help people with gaps in their health insurance, have argued that the administration’s proposal could eliminate an affordable insurance option used by an estimated 1.5 million people in the US.
House Ways and Means Committee Chairperson Jason Smith, R-Mo., said in a statement Friday that “imposing new restrictions on short-term plans will stifle competition, drive up costs, limit the number of lower-premium options available, and in some cases outright take away the coverage many Americans have and can afford today.”
But Biden argued that the short-term “junk” plans allow insurers to discriminate against preexisting conditions, provide little or no coverage, and can lead to unexpected medical expenses.
Other STLDI critics, like the Association for Community Affiliated Plans (ACAP)—a trade group which sued the Trump administration over the 2018 changes—has further accused some STLDI brokers of deceptive marketing practices.
“They really are junk insurance,” ACAP CEO Margaret Murray told Healthcare Brew. “They look affordable, which is great until you need to use it.”
The Affordable Care Act (ACA), which sets minimum coverage standards, prohibits most health insurance plans from medical underwriting, denying coverage for preexisting conditions, and setting lifetime and annual limits.
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STLDI policies were excluded from those ACA rules, as well as some reporting requirements. That lack of data, coupled with varying state restrictions for such plans, makes it hard to say exactly how many people in the US are enrolled in short-term policies, Heather Foster, ACAP’s VP for marketplace policy, told us.
“The little bit that we do know datawise is that, [for] those that do report, we have seen that number increase steadily over the past few years since the 2018 rule,” she said. “We know there’s a good number of people, but it’s very hard to have a good understanding of exactly how many, because they just don’t report it.”
STLDI critics have also argued that the distinction between ACA plans and STLDI policies is not always clear to consumers.
Undercover agents found some STLDI sales representatives “engaged in potentially deceptive practices,” according to a 2020 Government Accountability Office report. Similarly, a 2019 Robert Wood Johnson Foundation report found that online searches for ACA plans often direct consumers to STLDI policies, and many brokers fail to provide complete information on short-term insurance products.
Still, short-term policies have a place in the health insurance market—as long as they’re limited to three to four months, as proposed by the Biden administration, Murray said. She lauded the White House’s proposed rules, adding that ACAP “would like to see them go a little bit further. We would like to see it go into effect earlier—in other words, this year.”
“We like the emphasis on transparency, making it much more clear to people what they’re buying and—more importantly—what they’re not buying,” she said of the proposal.
Spokespeople for UnitedHealthcare and Health Benefits Connect, which offer short-term health insurance plans, did not immediately respond to requests seeking comment on the Biden administration’s proposal.