At Last! Biden-Harris Admin announces final rule cracking down on #ShortAssPlans!

This has been a long time coming, with lots of Sturm und Drang along the way, but it's finally here:

President Biden Announces New Landmark Rule to Protect Americans from Junk Health Insurance

  • Latest action to deliver better health care and prevent consumers from getting ripped off

Today, the Biden-Harris Administration is taking a major step to crack down on junk health insurance for American families and consumers and deliver better health. As the President has said, people hate being played for suckers and the current practice of offering low-quality insurance that people pay into, but then provides no coverage when people need it, is a bait and switch. That’s why the Biden-Harris Administration is issuing a final rule that protects consumers from junk health insurance and makes sure Americans aren’t scammed into low-quality coverage that leaves consumers on the hook for thousands of dollars in medical bills or denies life-saving care right before treatment. The President is committed to building on the promise of the Affordable Care Act and its critical consumer protections that ensure meaningful coverage for people’s health care needs.

I'll get back to the details of the new rule, but first, once again, here's a refresher on what STLDs are via KFF:

Short-term, limited duration (STLD) health insurance has long been offered to individuals through the non-group market and through associations. The product was designed for people who experience a temporary gap in health coverage. Unlike other products that are considered “limited benefit” or “excepted benefit” policies – such as cancer-only policies or hospital indemnity policies that pay a fixed dollar benefit per inpatient stay – short-term policies are generally considered to be “major medical” coverage; however, short-term policies are distinguished from other comprehensive major medical policies because they only provide coverage for a limited term, typically less than 365 days. Short-term policies are also characterized by other significant limitations, including the types of services covered, often with a dollar maximum. individual who buys a short-term policy and then becomes seriously ill will not be able to renew coverage when the policy ends.

...short-term policies:

  • are often medically underwritten – applicants with health conditions can be turned down or charged higher premiums, without limit, based on health status, gender, age, and other factors;
  • exclude coverage for pre-existing conditions – policyholders who get sick may be investigated by the insurer to determine whether the newly-diagnosed condition could be considered pre-existing and so excluded from coverage;
  • do not have to cover essential health benefits – typical short-term policies do not cover maternity care, prescription drugs, mental health care, preventive care, and other essential benefits, and may limit coverage in other ways;
  • can impose lifetime and annual limits – for example, many policies cap covered benefits at $2 million or less;
  • are not subject to cost sharing limits – some short term policies, for example, may require cost sharing in excess of $20,000 per person per policy period, compared to the ACA-required annual cap on cost sharing of $7,350 in 2018;
  • are not subject to other ACA market requirements – such as rate review or minimum medical loss ratios; for example, while ACA-compliant non-group policies are required to pay out at least 80% of premium revenue for claims and related expenses, the average loss ratio for individual market short-term medical policies in 2016 was 67%; while for the top two insurers, who together sold 80% of all short-term policies in this market, the average loss ratio was 50%.

In other words, #ShortAssPlans are basically like pre-ACA individual market policies...they don't include guaranteed issue, community rating, essential health benefits or most of the other "Blue Leg" requirements of ACA policies.

As the name suggests, the whole point of these policies is that they're supposed to be both "short-term" (ie, you only use them for a few months as a stopgap between more comprehensive, reliable coverage) and for a "limited duration" (that is, you're not supposed to daisychain them together to cover you for the full year).

The Obama administration used regulatory authority to restrict #ShortAssPlans to no more than ~90 days per year (making them "short term") and prohibited carriers from offering these 3-month stints back-to-back (thus making them "of limited duration"). In other words, the Obama Admin required STLDs to be both ST and LD.

As I explained in a now-somewhat outdated video a few years back, however, the Trump Administration rescinded this policy, allowing STLDs to last up to 365 days at a time (ie, a full year)...and letting them be renewed after that, thus making the "STLD" branding utterly meaningless. In addition, the Trump Admin put a mountain of effort into encouraging people to enroll in these policies, which go against the entire point of the ACA's patient protection provisions.

Personally, while I'm not a fan of STLDs on principle (thus the #ShortAssPlans moniker), as I noted back in May 2021 when Biden HHS Secretary Xavier Becerra was asked about the issue:

...“And,” [Becerra] added, “there is under the Affordable Care Act a place for some short-term plans, but it is truly short-term plans for those who need short-term care who are in between jobs for example or who are going overseas for a little while and can't--don't have the luxury to have a plan that is long-term because you only need it short-term.

This is about where I'm at right now. Regular readers know I'm not a fan of Short-Term, Limited Duration (STLD) plans at all, but I do see a very limited purpose for them. The whole reason they're called "Short Term, Limited Duration" is specifically because they're intended to be just that: For the short term only, and for limited durations only. They were never intended to be a replacement for major medical policies.

Going back to the Obama-era rules, which restrict STLDs to last no more than 3 months, once per year, seems reasonable for the time being...and if the expanded subsidies of the American Rescue Plan are made permanent and Senator Sheehan's S.499 bill (which would upgrade the benchmark plan from Silver to Gold and significantly improve CSR assistance) becomes law, I'll fully support eliminating STLDs altogether (which some states have already done).

In other words, I was grudgingly willing to accept #ShortAssPlans as a necessary evil under the original ACA subsidy structure, as long as they're tightly restricted...but if & when the upgraded ACA subsidies under the Inflation Reduction Act are locked in permanently, I'd be perfectly fine banishing STLDs to the aether.

At the moment, things are sort of in between these states: The IRA subsidies are generous enough to make STLDs mostly unnecessary...but they aren't permanent yet, as they're currently scheduled to sunset at the end of 2025.

As for the final STLD rule itself, let's return to the White House press release:

The Affordable Care Act has helped tens of millions of Americans access high-quality, affordable health insurance and protects Americans from being discriminated against because of pre-existing conditions.  But actions by Republican elected officials, including the previous administration, undermined the promise of the Affordable Care Act, allowing insurance companies to take advantage of loopholes in the law and sell “junk insurance” plans that evade its critical consumer protections, like denying care based on pre-existing conditions. These “junk insurance” plans leave families surprised by thousands of dollars in bills, often because the insurance plan claims they have a pre-existing condition that isn’t covered.  For example, a man in Montana faced $43,000 in health care costs because his insurance plan claimed his cancer was a pre-existing condition, and a Pennsylvania woman was surprised by nearly $20,000 in bills for an amputation her junk plan refused to cover. 

With today’s rule, the Biden-Harris Administration is cracking down on this junk health insurance as part of its continued efforts to eliminate hidden fees and rip offs in every industry across the economy.  These actions will reduce scam insurance plans that offer really no insurance at all.

  • “Short-term” plans must be truly short-term.  Under the new rules, new plans that claim to be “short-term” health insurance are now limited to just 3 months, with renewal for a maximum of 4 months total, if extended – instead of up to 3 years as the previous administration allowed, causing junk health insurance plans to proliferate and confuse consumers that they were real, comprehensive coverage when they in fact provided little to no coverage.
  • Plans have to clearly disclose limits. Insurance plans will now be required to provide consumers with a clear disclaimer that explains the limits of what services they cover and how much they cover. 

And...that's pretty much it.

Honestly, this is...fine. I'm amused to see the White House make the exact point I've been making for years: If you're going to offer something called a "short term" plan, it seems like at the very least that it should indeed be limited to a short term.

They damned well better get those enhanced IRA subsidies made permanent, however.

On a possibly related note, according to Amy Lotven of Inside Health Policy, the Biden Admin backed off of some other proposed regulations, however:

The draft rule had also proposed changes to fixed indemnity coverage, which pays enrollees a set fee per incident.

To address concerns about consumer confusion and the potential use of the coverage to replace major medical insurance, the draft rule had proposed barring fixed indemnity plans from paying benefits on a per-service basis and clarified the coverage cannot be coordinated with other benefits. It also proposed to clarify the tax treatment of fixed indemnity plans and a beefed-up notification requirement. While advocates supported the changes, numerous stakeholders, including employers and insurers, were strongly opposed and warned that finalizing the rule would spur an immediate lawsuit.

A White House official says HHS, Treasury and Labor continue to consider those proposals but will not be finalizing changes to the definition or tax treatment of fixed indemnity benefits, but the plans will be subject to new notification requirements.

White House officials also dismissed a query on whether the rule, which was proposed in July, was being finalized now in order to avoid potentially being targeted by the Congressional Review Act. There’s nothing unusual about the cadence the officials said. What is interesting about timing is that the rule is coming out at the same time the GOP is promoting a budget that pushes non-ACA compliant plans instead of protecting consumers, the official added.