Biden administration aims to crack down on short-term health plans, surprise medical billing

The Biden administration announced plans on Friday to tamp down on short-term health plans and surprise medical fees as part of an ongoing effort to lower healthcare costs.

The White House proposal would reverse a controversial Trump-era rule that expanded the duration of short-term health plans, or what critics refer to as "junk" plans.

Under the new rules, if finalized, plans that claim to be “short-term” health insurance would be limited to just three months, or a maximum of four months, if extended – instead of the current three-year maximum. And, under the proposed rules, plans are required to provide consumers with a clear disclaimer that explains the limits of their benefits, including to existing consumers currently enrolled in these plans. 

The Trump administration finalized the regulation in 2018 for short-term limited duration plans that can bypass requirements under the Affordable Care Act (ACA) to cover preexisting conditions and essential health benefits. The rule said that the 12-month plans can be renewed for up to 36 months.

HHS at the time said the plans were necessary to give consumers options as premiums on the ACA’s exchanges were too high. Short-term plans are not required to abide by Affordable Care Act (ACA) protections.

However, the insurance industry and consumer advocates charged the plans offer skimpy coverage and can deceive consumers that they are getting more robust benefits, Robert King reported last year.

"The new proposed rules would close loopholes that the previous administration took advantage of that allow companies to offer misleading insurance products that can discriminate based on pre-existing conditions and trick consumers into buying products that provide little or no coverage when they need it most," President Biden said in a White House fact sheet outlining the proposals. "These plans leave families surprised by thousands of dollars in medical expenses when they actually use health care services like a surgery. If finalized, the rule would limit so-called 'short-term' plans to truly short time periods, close loopholes made worse by the previous administration, and establish a clear disclosure for consumers of the limits of these plans."

One insurance industry group, the Association for Community Affiliated Plans (ACAP), welcomed the move to reverse the Trump-era expansion of short-term health insurance plans.

“It’s time to make it clear that junk insurance is no substitute for the real thing," said Margaret Murray, ACAP's chief executive officer in a statement. "Short-term, limited duration insurance and other non-ACA-compliant 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. The result is people pay a lot more money—and in return, often receive far less coverage than they are led to believe they’ve purchased. That’s why we sued to stop the expansion of these plans."

“Short-term plans were created to fill in brief gaps in coverage for workers as they moved between jobs. They were never designed to work as comprehensive coverage—as the last few years have proven," Murray said.

The Biden administration also is proposing new rules to make it harder for providers to circumvent a new law that bans surprise billing.

The bipartisan "No Surprises Act" took effect January 1, 2022, and effectively banned large, unexpected medical bills. 

According to the Biden-Harris administration, the law has protected 1 million Americans every month from unfair, undeserved out-of-network charges and balance bills since it went into effect a year ago.

But some providers are "gaming the system" by evading the surprise billing rules with "creative contractual loopholes that still leave consumers with unexpected costs," according to the Biden administration. For example, some health plans contract with hospitals, but try to claim that they are not technically “in-network” – which can expose consumers to higher payments when they have to make a hospital visit.  

"The Administration today is making clear this is not allowed under federal law: health care services provided by these providers are either out-of-network and subject to the surprise billing protections, or they are in-network and subject to the ACA’s annual limitation on cost-sharing, further protecting consumers from excessive out-of-pocket costs," Biden said in a statement.

The guidance also clarifies that health plans and providers must make information about facility fees publicly available to consumers, as well as other price information for services and items they cover or provide.

And, nonparticipating providers and nonparticipating emergency facilities cannot evade the protections of the No Surprises Act, including the prohibition on balance billing, by renaming charges otherwise prohibited under the No Surprises Act as “facility fees," the White House said.

The administration also plans to investigate the use of medical credit cards. 

Three federal agencies, including HHS, the Consumer Financial Protection Bureau (CFPB) and Treasury, plan to look into the use and marketing of these financial products.

"These credit cards often include teaser rates and deferred interest features that lead to higher costs for consumers, and may be offered even when low- or no-cost alternatives, such as zero-interest payment plans, financial assistance, or health coverage may be available," Biden said in the White House statement.

The Biden administration also touted its efforts to lower medical costs for consumers. HHS released a new report projecting that nearly 19 million seniors will save around $400 per year on prescription drug costs when the $2,000 out-of-pocket prescription drug spending cap from the Inflation Reduction Act goes into effect in 2025.

Among this population, the report finds nearly 1.9 million enrollees are projected to save at least $1,000 in 2025. 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, HHS officials said.