Biden administration rolls back extension of short-term plans

The Biden administration is cracking down on short-term health insurance plans that aren’t required to meet the Affordable Care Act’s consumer protection mandates.

The U.S. Department of Health and Human Services issued a final rule rolling back a Trump-era policy that expanded what Biden called “junk” plans.

Short-term, limited-duration insurance is a type of health insurance that is typically designed to fill temporary gaps in coverage when an individual is transitioning from one source of coverage to another. Unlike most health insurance plans, STLDI plans are not subject to the ACA’s consumer protections, including guaranteeing coverage for people with pre-existing conditions and prohibiting discrimination based on health status, age or gender.

The final rules will limit these short-term plans to no more than four months instead of three years.

In addition, the final rule will require health insurance companies to be clear and up front with what consumers are buying. Short-term plans, as well as “fixed indemnity” insurance policies that provide a fixed, cash payment for a health care event, must include a clear, easy-to-understand consumer notice on marketing, application, enrollment, and reenrollment materials, so that consumers can make informed coverage purchasing decisions. The final rules increase transparency while helping to ensure that consumers do not mistakenly enroll in these types of insurance plans as substitutes for comprehensive coverage.

Senior administration officials said the new rule will apply only to new plans, not existing ones.

The industry reacts to short-term plan rule

The National Association of Benefits and Insurance Professionals, in a statement, acknowledged that short-term plans are not a substitute for comprehensive health coverage, and urged consumers to seek assistance from a licensed health insurance professional to obtain coverage.

NABIP CEO Jessica Brooks-Woods issued the following statement:

“NABIP acknowledges that STLDI plans are not a substitute for comprehensive health coverage. Professional agents and brokers, with their deep knowledge and expertise, are crucial in guiding consumers through their health insurance options, including re-enrollment in Medicaid where eligible, or in claiming all entitled subsidies through the exchanges.

“NABIP's members, who currently sell STLDI, report that these consumers typically lack access to group coverage and are ineligible for exchange-based individual market premium tax credit subsidies, seeking lower-cost options. While NABIP understands the intention to curtail the availability of STLDI coverage that mimics traditional individual insurance, we will continue to advocate for a balanced approach that considers the diverse needs of consumers and the critical role of professional agents and brokers in the insurance marketplace.

“The agencies listened to comments provided by NABIP regarding Fixed Indemnity plans, which provide cash payments to policy holders when they are sick or injured. Employers and employees can continue to utilize these plans to offset high out of pocket costs. NABIP will continue to advocate for the best health insurance coverage options for all consumers.

“NABIP is committed to ongoing dialogue with policymakers, members, and stakeholders to ensure a fair and effective regulatory environment for STLDI. We will continue to provide updates and guidance as we further assess the rule's implications. For individuals who are currently using STLDI plans, we encourage them to speak to a local agent about their options for obtaining affordable coverage. Go to NABIP’s agent-finder to find a local agent in your community.”

The American Council of Life Insurers issued a statement saying the organization was pleased that the rule does not impact the sale of supplemental policies. As originally proposed, the rule would have disallowed many benefits now available to policyholders of certain supplemental products.

“The agencies took care in the final regulations to ensure they did not adversely affect supplemental benefits,” said ACLI president and CEO Susan Neely. “The new disclosure requirements are consistent with life insurers’ commitment to ensuring that consumers are informed on what supplemental benefits products cover and the financial protections they provide prior to purchase.”

Supplemental benefit policies help people pay for health expenses not covered by primary medical insurance. They can reimburse policyholders for safety modifications to an apartment or home, transportation to a medical facility, co-pays and deductibles, and many other expenses normally paid for out-of-pocket.

Meanwhile, the National Association of Insurance and Financial Advisors objected to the rules.

In a statement, NAIFA said it agrees with portions of the rules that require health insurance companies to be clear and up front with consumers about the types of policies they are buying and those policies’ benefits and limitations.

NAIFA also acknowledges the intentions in aiming to eliminate STLDI coverage that closely resembles traditional individual insurance coverage. However, instead of imposing a drastic shift in available STLDI options, a middle-ground approach would be more useful in addressing these concerns while still protecting Americans.

NAIFA has actively opposed proposed amendments to the rules that would change the income tax and employment tax treatment of money received through employment-based accident or health insurance paid without regard to the amount of incurred medical expenses and where the premiums or contributions for the coverage are paid on a pre-tax basis.

“The new, excessive limitations on short-term, limited-duration health plans do not reflect marketplace realities,” said Kevin Mayeux, NAIFA CEO. “Calling STLDI policies ‘junk insurance,’ as the administration does in a press release announcing the new rules, betrays a stunning lack of understanding of how these policies often provide important protections to Americans at times when they are financially vulnerable. It also does a potentially dangerous disservice to consumers who would benefit from short-term insurance but are confused or dissuaded by the government’s hostile language.”