The Biden administration has begun unwinding one of the Trump administration's signature healthcare policies by seeking to impose stricter regulations on short-term, limited-duration health insurance plans.
The Health and Human Services, Labor and Treasury departments unveiled a proposed rule Friday that would restrict short-term policies to three-month terms. This essentially would restore the regulations in place before 2018, when President Donald Trump's administration issued a rulemaking enabling consumers to keep short-term plans for up to 364 days and to renew them for up to three years. The new draft regulation to rein in short-term, limited-duration health insurance is part of a slate of health policy initiatives President Joe Biden announced Friday.
“Today’s announcement protects patients from junk health insurance” HHS Secretary Xavier Becerra said in a news release Friday.
In addition to shortening the amount of time policyholders can retain this form of coverage, the proposed rule would disallow reenrollment in the same plans, although consumers would be permitted to purchase different short-term policies consecutively for up to 36 months. Under the Biden administration proposal, short-term, limited-duration plans would again function as gap coverage for consumers in between other forms of insurance, such as job-based health benefits.
The Trump administration billed its relaxation of the rules governing short-term health insurance as a means to provide lower-cost coverage options to compete with comprehensive health insurance plans, such as those sold on the exchange marketplaces. These limited-duration policies are not subject to many federal insurance rules, including those from the Affordable Care Act that guarantee basic benefits and prohibit insurers from refusing customers based on preexisting conditions.
“This regulation sends an unequivocal message: Junk insurance is no substitute for the real thing.” Association for Community Affiliated Health Plans CEO Margaret Murray said in a news release. “Short-term, limited-duration insurance and other non-ACA-compliant plans offer a false sense of security that threatens consumers’ physical and financial health. They trick customers with low premiums, only to force them to swallow skimpy or even non-existent coverage." The insurance industry group unsuccessfully sued to stop the Trump-era rule in 2018.
The Alliance of Community Health Plans offered a similar reaction. "ACHP is pleased to see the Biden administration offer continued support for affordable healthcare options in the recent announcement while ensuring protections for consumers. Now, consumers will be able to retain access to affordable coverage while simultaneously ensuring the market works for everyone and patient protections are in place,” the association said in a statement.
The health insurance trade association AHIP did not respond to a request for comment.
The American Hospital Association welcomed the draft regulation. "The AHA is pleased with the administration’s proposal to protect consumers from skinny 'health plans' that often fail them," Executive Vice President Stacey Hughes said in a news release. "This rule, if finalized, will go a long way in protecting patients from unexpected coverage denials. "
A dozen states effectively ban short-term insurance sales by outlawing medical underwriting for them, while 13 states and the District of Columbia only allow three-month terms, according to the National Association of Insurance Commissioners.
The proposed rule also would revamp the regulation of fixed indemnity medical plans that offer coverage with hard dollar caps and aren't subject to federal benefit and coverage standards. Under the draft regulation, which would supplant a 2014 rule, insurers would have to pay claims on a per-period basis, not a per-service basis.
These policies originated as a complement to comprehensive health coverage and provide income replacement to policyholders with health problems but have proliferated as carriers designed them to more closely resemble traditional health insurance.
The Health and Human Services, Labor and Treasury departments will accept comments on the proposed rule through Sept. 11.
