Biden Administration Proposes Rule Cracking Down on Short-Term Health Plans

Healthcare groups are pleased with the Biden administration’s proposal to crack down on so-called “short-term limited-duration insurance” (STLDI) plans.

The proposal from HHS and the departments of Labor and Treasury would change the definition of STLDI to give the plans a maximum coverage period of 4 months (3 months for the initial plan plus an optional 1-month renewal); currently STLDI can be sold for an initial 1-year term and then be renewed for another 2 years due to changes made in the STLDI definition under the Trump administration.

“We believe short-term, limited-duration plans are meant to be a bridge, not a substitute for long-term, meaningful coverage,” Tochi Iroku-Malize, MD, MPH, president of the American Academy of Family Physicians (AAFP), said in a statement Friday. “Without appropriate coverage of necessary care and protections for individuals with pre-existing conditions, low-quality insurance plans threaten access to coordinated, longitudinal primary care and can saddle patients with catastrophic medical bills. This proposed rule is an important step forward to ensure access to affordable, comprehensive healthcare for all.”

Margaret Murray, CEO of the Association for Community Affiliated Plans, which represents safety-net health plans, noted that “short-term, limited-duration insurance 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,” she said. “We have every expectation that the administration will put an end to the practice of junk plans masquerading as actual health insurance, and enhance needed consumer protections.”

The proposal also would prohibit the same issuer from issuing multiple STLDI policies to the same policyholder within a 12-month period. “This practice, known as ‘stacking,’ takes advantage of a loophole to provide separate, sequential STLDI policies that collectively evade duration limits, obscuring the distinction between STLDI and comprehensive coverage,” CMS said in a fact sheet.

“Short-term plans are intended to provide temporary coverage as people transition from one source of insurance to another, like when we’re between jobs,” a senior administration official said on a call with reporters Thursday afternoon. “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. This leaves patients footing the bill — often for thousands of dollars’ worth of surprise charges.”

In one case, the official said, “a man in Montana faced $43,000 in healthcare costs because his insurance plan claimed his cancer was a pre-existing condition … That’s not real insurance; that’s junk insurance.”

The HHS/Labor/Treasury proposal would ensure that consumers receive “clear information” about the differences between STLDI and comprehensive coverage so they can be better informed when purchasing health insurance. It also would differentiate between those types of coverage and “fixed indemnity” coverage, which offers a set amount (say $50 or $100) per procedure or service, regardless of how much the service actually costs. The administration is accepting comments on the proposed rule through September 11.

The administration also released guidance related to surprise medical bills, in which patients go for a procedure at an in-network hospital or other facility only to discover that one or more of the providers there is out of network, leaving the patient with a large and unexpected bill for out-of-network care. The No Surprises Act requires such providers to only bill patients at the in-network rate and negotiate with the insurer to settle any remaining charges. It also requires that patients be charged in-network rates for emergency care and certain other services provided at out-of-network facilities.

“Under this new guidance, we’re making it clear that plans and providers cannot evade surprise billing rules simply by changing the terms of use in their contracts,” the official said. “For example, some health plans contract with hospitals, then try to claim that they are not technically ‘in-network.’ Frankly, what they are doing is gaming the system. This is not allowed and as our guidance will describe, it must end.”

Another senior administration official told MedPage Today that “we are making clear that a service is either out of network and therefore subject to the protections of the No Surprises Act, or in network and therefore subject to the protections of out-of-pocket maximums, for example. We are saying there is no gray area here.”

The administration — including HHS, the Consumer Financial Protection Bureau, and the Treasury Department — is seeking public comment on the “prevalence, nature, and impact of medical credit cards and other medical payment products on consumers and on the healthcare system,” CMS said in a press release. “The agencies also seek comment on policy options to address practices by financial companies and healthcare providers offering these products that result in consumers paying excess costs and that drive up medical debt.”

“These credit cards often include teaser rates and deferred interest features that lead to higher costs for consumers,” a senior administration official said on Thursday’s phone call. “Healthcare providers may be operating outside of existing consumer protections because once medical bills are placed on medical credit cards, there may be gaps in how various consumer protections apply. Consumers may not fully understand the risks associated with these products.”

Also on Friday, the White House released research showing that the Inflation Reduction Act’s changes to the Medicare Part D program could save more than 18.7 million enrollees nearly $400 in out-of-pocket costs when the law’s provisions are implemented in 2025.

“Among this population, the report finds nearly 1.9 million enrollees are projected to save at least $1,000 in 2025,” HHS said in a press release. “Once all of the provisions modeled in this report are in effect in 2025, they collectively will result in about a $7.4 billion reduction in annual out-of-pocket spending.”

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