Short-term health plans subject to new rules

Short-term limited-duration health insurance plans are in the crosshairs as three federal agencies proposed rules to clamp down on the plans that some deride as “junk insurance.”

The Departments of Health and Human Services, Labor and the Treasury issued proposed rules to distinguish short-term plans and fixed indemnity plans from comprehensive health coverage. In addition, the Biden administration wants these plans to be limited to no more than four months.

Fixed indemnity plans pay a predetermined fixed amount for a health-related event, regardless of what expenses the insured incurred. Short-term and fixed indemnity plans sometimes include benefit limitations and are not subject to many of the Affordable Care Act’s rules. Consumers might not realize this when purchasing these plans, and often end up in plans that do not cover ACA essential benefits such as prescription drugs. In addition, short-term plans often exclude coverage for pre-existing conditions or impose annual or lifetime dollar limits on services.

HHS said in a news release that the proposed rule would amend the federal definition of short-term limited-duration insurance to ensure the plans “are truly short-term and used to fill temporary gaps in comprehensive coverage.”

Under the rule, short-term health plans would last for three months and can be renewed for only one more month. This would reverse a Trump administration rule that allowed short-term plans to last for up to a year and be renewed for up to three years. A 2016 rule under the Obama administration limited these plans to three months.

Consumers currently enrolled in short-term plans will be grandfathered in under the old rules, Politico reported today.

The new rules would also require short-term insurance providers to specify that the plans do not provide comprehensive coverage similar to traditional health insurance, and they would have to clearly disclose the limits to the benefits that customers receive.