Biden Administration Cracks Down on ‘Junk’ Health Insurance Plans

Health insurance companies selling short-term limited duration insurance (STLDI) will have to spell out what is not covered by their policies under a final rule released Thursday by the Biden administration.

“Insurance companies will now have to provide a clear disclaimer that explains to people exactly what is not covered, and tells them how to find comprehensive insurance,” White House Domestic Policy Advisor Neera Tanden told reporters on a phone call Wednesday. “This rule makes these plans fair and helps ensure that consumers know what they’re getting into when they sign up for insurance. It is essentially ensuring that their insurance systems are policed to really provide true protections to consumers.”

The rule also will limit the short-term coverage period to 3 months in most cases, with some exceptions that allow for 4 months’ coverage. It also applies only to new customers, not those who already have policies.

Tanden noted that STLDI policies don’t provide comprehensive coverage, but instead “are intended to provide temporary coverage as people transition from one source of coverage to another — like when they’re going between jobs … Importantly, they don’t have to comply with critical ACA [Affordable Care Act] protections” such as coverage of preexisting conditions. “Under the previous administration, however, companies were allowed to take advantage of loopholes to sell junk insurance for much longer than intended — up to 3 years,” she said.

In addition, “these junk insurance plans misled consumers into thinking they were buying real health insurance; then, when people needed medical care, they found out their plans capped their benefits … that their care just isn’t covered at all,” she continued. “Right when you need insurance most, you’re stuck footing a giant bill. That’s not real insurance. That’s a scam. And the president really believes that the American people do not want to be taken for suckers, and junk insurance takes them for suckers.”

As to how many people will be affected by the rule, the numbers are not entirely clear. The final rule notes that “data from the NAIC [National Association of Insurance Commissioners] indicate that the number of individuals covered by STLDI sold to individuals [as opposed to policies sold to groups] more than doubled between 2018 and 2019, from approximately 87,000 to 188,000, and further increased to approximately 238,000 in 2020 before declining to approximately 173,000 in 2021.” However, those numbers only reflect those covered by the policies at the end of the year — not those who might have only been covered earlier in the year — and they don’t include those who were covered by policies sold to or through associations.

On the other hand, “projections by the Congressional Budget Office (CBO) and the Joint Committee on Taxation suggest that 1.5 million people could currently be enrolled in STLDI, and CMS previously estimated that 1.9 million individuals would enroll in STLDI by 2023,” the authors wrote.

During a question-and-answer session, a senior administration official contrasted the final rule with a budget proposal by the Republican Study Committee — a group of conservative congressional Republicans — that she said would, “instead of protecting consumers from these junk plans, lift them up and really promote these scammy health insurance products … There’s a clear contrast between actions being taken this month and in the last 2 weeks from this administration versus the Republican Congress.”

The administration also issued a rule Wednesday that would streamline the Medicaid enrollment process. “This means that kids in Arizona, Indiana, and seven other states won’t have to wait for their Children’s Health Insurance Program coverage to start,” said Tanden. “Families in Colorado, Texas, and 11 other states won’t have to worry about their children’s coverage running out because they reached a benefit limit. These actions will improve healthcare for millions of American children and their families.”

Both rules will take effect 60 days after publication.

Joyce Frieden oversees MedPage Today’s Washington coverage, including stories about Congress, the White House, the Supreme Court, healthcare trade associations, and federal agencies. She has 35 years of experience covering health policy. Follow

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