HHS issues final rule to regulate ‘junk’ insurance, limiting access to short-term plans

The Biden administration last week announced new steps to crack down on so-called “junk insurance” plans.

“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 with the coverage or protection they expect,” HHS Secretary Xavier Becerra said. “We want everyone to have the peace of mind that comes with having coverage that includes the protections and benefits they expect.”

The final rule will modify short-term, limited-duration insurance and independent, non-coordinated excepted benefits coverage. These plans typically are not covered by the Affordable Care Act but 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.

In addition, the final rule will require health insurance companies to be clear and upfront about what consumers are buying. Short-term plans, as well as fixed-indemnity insurance policies that provide a fixed cash payment for a health-care event, will have to include a clear, easy-to-understand consumer notice. It will explain marketing, application, enrollment and reenrollment materials so consumers can make informed purchase decisions. The final rules increase transparency while helping ensure that consumers do not mistakenly enroll in these types of insurance plans as substitutes for comprehensive coverage. Also, consumers cannot purchase short-term, limited-duration insurance plans issued by the same company within a one-year period.

The American Medical Association agrees with the changes. “These short-term policies are often marketed and sold in a misleading and deceptive manner, leading consumers to confuse them for comprehensive insurance,” AMA president Dr. Jesse Ehrenfeld said. “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.”

Related: New ‘Junk insurance” regs could end some voluntary benefits plans, industry insiders say

The Centers for Medicare & Medicaid Services also supports the new rule. “By increasing consumer understanding of short-term, limited-duration insurance and fixed indemnity excepted benefits coverage and making short-term plans truly short term, people will be more informed about the risks associated with these types of coverage and their options for comprehensive coverage,” CMS Administrator Chiquita Brooks-LaSure said.

The National Association of Insurance Commissioners will work with federal and state oversight departments to enforce short-term limited duration plans through group trusts and associations. The changes will take effect for short-term plans sold or issued after September 1 this year.