Biden Administration Announces Crackdown on “Junk Insurance”

August 1, 2023by Alex Strautman

The Biden administration is actively working to reduce costs and junk fees for American health care consumers. The proposed rules aim to close loopholes related to short-term health insurance.

Current Short-Term Health Plans

The current Trump-era rule allows short-term plans of 90 days to one year – with an extension up to three years. The response in California was to end the availability of short-term plans. The state legislature passed a law effective in 2019 that prohibits short-term health insurance. Besides California, 11 other states and the District of Columbia prohibit such plans.

Critics say these plans frequently don’t cover pre-existing health conditions. They also limit coverage for many health care services. Short-term health plans have some supporters because they cost less than Affordable Care Act (ACA)-compliant plans. But opponents argue, even at the reduced cost, they are not worth the premiums.

Short-term health plans often leave individuals with thousands of dollars in unpaid bills. One example cited by the White House press release is a Montana man. He faced $43,000 in costs because his plan claimed his cancer was a pre-existing condition. Another is a Pennsylvania woman who was surprised by nearly $20,000 in bills for an amputation her plan refused to cover.

New Rules for Short-Term Plans

New rules will require plans be truly short-term. They can offer coverage limited to just three months with a maximum of four months, if extended. Income replacement “fixed indemnity” plans cannot mimic comprehensive health insurance. They’re required to specify that short-term plans pay a defined benefit only (e.g. $100 for each day of illness). A clear disclaimer explaining plan limits must be given to consumers who enroll.

Other changes planned in the Biden-Harris proposal include:

  • curbing in-network designations that often lead to surprise bills for consumers;
  • changing facility treatment fees like other health care costs; and
  • protecting consumers from unfair medical debt incurred in connection with medical credit cards.

New Rule Adoption

The response from Congress on proposed changes is uncertain. Democrats have voiced support. But the Republican-controlled House of Representatives may push back.

The immediate impact on California businesses is likely to be limited. Few employers offer junk insurance as an employee benefit. Some employers may offer “supplemental” insurance plans that could be affected.

We’ll track the adoption of new rules, and actions by Congress, and updates in future articles.

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