The Biden administration is releasing new standards around "junk" insurance, the Department of Health and Human Services and Treasury Department announced Thursday.
The final rule will modify short-term, limited-duration insurance (STLDI) and independent, non-coordinated excepted benefits coverage. STLDI plans are not traditionally covered by the Affordable Care Act, but these plans help individuals transition from one type of coverage to another.
Now, these plans will be capped at a four month duration instead of three years. It will also mandate insurers to be more transparent with its offerings to consumers by including a consumer notice on all marketing, application and enrollment materials. A notice must be included on the first page of any policy, certificate or contract.
The feds hope individuals will no longer enroll and re-enroll in STLDI plans that are inferior to the ACA, because ACA plans do not allow people to denied coverage for pre-existing conditions and age or gender-based discrimination.
“HHS is cracking down on junk insurance plans to help consumers make informed choices and avoid mistakenly paying for a plan that does not provide them the coverage or protection they expect,” said HHS Secretary Becerra in a news release. “Over the past three years, we have helped more people gain access to high-quality, affordable coverage — and more than 300 million Americans are covered for the first time ever. We want everyone to have the peace of mind that comes with having coverage that includes the protections and benefits they expect.
Stacking, which is when health plans provide separate STLDI policies to "evade duration limits, obscuring the distinction between STLDI and comprehensive coverage," according to a CMS fact sheet. The changes rolled out today will outlaw that practice, CMS said.
The American Medical Association (AMA) approved of the changes and is "thankful" for the reversal in policy from 2018 that the association opposed.
"These short-term policies are often marketed and sold in a misleading and deceptive manner, leading consumers to confuse them for comprehensive insurance," said Jesse Ehrenfeld, M.D., president of the AMA. "Under the new rule, health insurance companies must clearly state what consumers are buying so they are not left with onerous medical bills after accessing health care."
The National Association of Insurance Commissioners (NAIC) will work with the feds and state oversight departments to enforce STLDI plans through group trusts and associations.
These changes take effect for STLDI plans sold or issued after Sept. 1.