The Biden administration wants to crack down on short-term health insurance plans, which it says can leave patients saddled with hefty medical bills.
The proposed rule, announced Friday as part of a series of actions aimed at lowering health care costs, would limit the duration of these controversial plans to three months with the option of a one-month extension. It would also require that plans provide consumers with clear explanations of their benefits, which are typically less comprehensive than other policies.
The proposal would largely reverse former President Donald Trump’s expansion of short-term plans in 2018, which extended the duration of the policies to just under a year and allowed them to be renewed for a total of up to 36 months. The move was one of many actions the prior administration took to chip away at the Affordable Care Act.
Short-term plans do not have to adhere to Obamacare’s consumer protections. For instance, they are not required to provide comprehensive coverage, and they can discriminate against people with pre-existing conditions.
The Trump administration heralded them as a cheaper alternative to Affordable Care Act policies since the limits on benefits allow short-term plans to carry lower premiums.
But Biden administration officials refer to short-term plans as “junk insurance.”
“Often consumers think they’re buying insurance that provides some decent coverage, not realizing these junk plans can limit what they cover and how much they cover,” White House domestic policy adviser Neera Tanden told reporters Thursday. “This leaves patients footing the bill, often thousands of dollars worth of surprise charges.”
Affordable Care Act supporters also fear that short-term plans may draw younger, healthier people away from Obamacare policies since these folks are more likely to be attracted to minimalist coverage. That could leave a larger share of older, sicker Americans in marketplace plans, which could prompt premium increases.
The long-expected proposed curtailment of short-term plans is one of the Biden administration’s latest efforts to lower health care costs and crack down on surprise junk fees, part of its so-called “Bidenomics” agenda aimed at helping middle- and working-class Americans. President Joe Biden is expected to discuss the measures in a speech on Friday.
Also, the Biden administration announced new guidance to strengthen rules protecting patients from surprise medical billing. It makes clear that federal law bars health insurers and hospitals from entering into contracts with each other but then trying to use creative loopholes to claim the providers are not technically in-network.
The health care services rendered by these providers are either out-of-network and subject to existing surprise billing protections or they are in-network and subject to Obamacare’s annual limits on out-of-pocket payments, the administration said.
In addition, health insurers and providers must make public information about facility fees charged for care offered outside of hospitals, such as at doctors’ offices. Patients are often surprised by these fees, which are increasing in prevalence.
The Department of Health and Human Services is collaborating with the Treasury Department and the Consumer Financial Protection Bureau to learn more about medical credit cards and loans and to solicit comments on potential policy actions.
The effort is the next step in the CFPB’s examination of these alternative financing products, which are becoming more common. It issued a report in May that found that financial companies are marketing these products to health care providers, who are pushed to offer them to patients.
The credit cards often come with lower teaser rates and deferred interest options that can ultimately lead to higher costs for patients, the administration said. They typically have higher interest rates than traditional credit cards.
Consumers who use these cards may be less likely to enter into lower-cost assistance programs or receive discounted prices.
Such products were once used to help people pay for health services not covered by insurance but are now being utilized to pay for emergency room visits and appointments with primary doctors and specialists, the bureau found. Providers can then shift patient billing to the finance companies.
“Financial firms are partnering with health care players to push products that can drive patients deep into debt,” Rohit Chopra, the bureau’s director, said in a statement.
This story has been updated with additional information.