The Biden administration is cracking down on “junk” health insurance plans

Health insurance companies selling short-term limited-duration insurance (STLDIs) will have to specify what their policies don’t cover under a final rule released Thursday by the Biden administration.

“Insurance companies will now have to provide a clear disclaimer that explains to people exactly what is not covered and tells them how to find comprehensive insurance,” White House domestic policy adviser Neera Tanden told reporters in a telephone call on Wednesday. “This rule makes these plans fair and helps ensure that consumers know what they’re getting into when they sign up for insurance.” Essentially, it ensures that their insurance systems are controlled to provide truly genuine consumer protection.”

The rule will also limit the short-term coverage period to 3 months in most cases, with some exceptions that allow coverage for 4 months. Also, it only applies to new customers, not those who already have policies.

Tanden noted that STLDI policies do not provide comprehensive coverage, but instead “are designed to provide temporary coverage while people move from one source of coverage to another—for example, when they move between jobs… Importantly, they do not make must meet critical ACA [Affordable Care Act] protections,” such as pre-existing condition coverage. “Under the previous administration, however, companies were allowed to take advantage of loopholes to sell junk insurance for much longer than intended — up to 3 years,” she said.

In addition, “these junk insurance plans fooled consumers into thinking they were buying real health insurance; then, when people needed medical care, they found that their plans were limiting their benefits … that their care was simply not being covered at all,” she continued. “Just when you need insurance the most, you’re stuck paying a huge bill. This is not real insurance. This is a scam. And the president really believes that the American people don’t want to be taken for granted, and junk insurance is taking them for granted.”

How many people will be affected by the rule, the numbers are not entirely clear. The final rule notes that “the data from the NAIC [National Association of Insurance Commissioners] show the number of persons covered by STLDI sold to individuals [as opposed to policies sold to groups] more than doubled between 2018 and 2019, from approximately 87,000 to 188,000, and further increased to approximately 238,000 in 2020, before declining to approximately 173,000 in 2021.” However, these numbers reflect only those covered by policies at the end of the year — not those that may have been covered only earlier in the year — and they do not include those covered by policies sold to or through associations.

On the other hand, “projections by the Congressional Budget Office (CBO) and the Joint Committee on Taxation suggest that 1.5 million people may currently be enrolled in STLDI, and CMS previously estimated that 1.9 million people will enroll in STLDI by 2023,” the authors wrote.

During a question-and-answer session, a senior administration official contrasted the final rule with a budget proposal from the Republican Study Committee — a group of conservative Republicans in Congress — that she said would “rather than protect consumers from this junk,” lift them up and really promote these fraudulent health insurance products… There is a stark contrast between the actions taken this month and over the past 2 weeks by this administration against the Republican Congress.”

The administration also issued a rule Wednesday that would streamline the Medicaid enrollment process. “This means that children in Arizona, Indiana and seven other states will not have to wait for Children’s Health Insurance Program coverage to begin,” Tanden said. “Families in Colorado, Texas and 11 other states won’t have to worry about their children’s coverage running out because they’ve reached a benefit limit. These actions will improve health care for millions of American children and their families.”

Both rules take effect 60 days after publication.