President Joe Biden on Friday announced a slew of new initiatives meant to lower healthcare costs, including new restrictions on short-term health plans and guidance to prevent surprise medical bills.
Curtailing short-term, limited duration health plans — originally designed as cheap safety-net coverage for just three months — has been a long-awaited move. The Trump administration in 2018 expanded the duration of the policies to a maximum of three years, part of a series of actions meant to chip away at the Affordable Care Act.
Conservatives herald the short-term plans as a cheaper alternative to more comprehensive coverage. But the plans, which aren’t required to cover the 10 essential health benefits under the ACA, have been found to discriminate against individuals with pre-existing conditions, routinely deny claims due to health status, retroactively cancel coverage for enrollees and generate surprise bills due to a lack of in-network providers.
Currently, short-term plans are banned or restricted in roughly half of states in the U.S.
Neera Tanden, director of the White House Domestic Policy Council, called the plans “junk” on a phone call with reporters ahead of Friday’s announcement.
“This rule will help make these plans fair and help ensure that consumers know what they’re getting when they sign up for insurance,” Tanden said.
Short-term restrictions
The proposed rule released Friday would limit short-term plans to three months, with the option of an additional one-month extension.
It would apply to short-term policies issued after the effective date of the final rule. Policies sold before could still offer an initial contract term of less than 12 months and up to 36 months.
Plans would also be required to provide a clear disclaimer explaining the limits of their benefits, including to beneficiaries currently enrolled in the plans. The notice most be “prominently” displayed on the first page of any policy or contract, along with any marketing and application materials, according to the proposed rule.
The proposal would also clarify coverage for fixed indemnity plans, which aren’t required to adhere to the rules for health insurance because they’re designed to replace lost income when people get sick.
Those plans would need to disclose that they are not comprehensive medical coverage, but instead a defined benefit, like $100 per day of illness.
There’s little comprehensive data on short-term plans, but enrollment grew to an estimated 3 million in 2019 after the Trump administration’s expansion, according to a House investigation.
Calls to restrict the plans have grown in urgency as states prepared to resume Medicaid eligibility checks, over fears that Americans kicked off the safety-net coverage would enroll in the limited policies.
Brian Blase, president of the right-leaning Paragon Health Institute who worked on the 2018 rule expanding the plans while advising the White House, told Healthcare Dive via email that new limitations would take away private coverage and increase the uninsured rate.
However, the Biden administration argues it’s the right time to limit short-term plans and help consumers differentiate between coverage options, given comprehensive coverage has become more accessible and affordable.
The proposed rule solicits comment on additional ways to help consumers distinguish between short-term and comprehensive plans, including potentially not allowing short-term plans to be marketed or sold when consumers are eligible to enroll in comprehensive coverage, such as the individual market open enrollment period.
“The Departments believe that it is important to ensure consumers have access to a wide range of tools that can support access to affordable healthcare. However, neither STLDI nor fixed indemnity excepted benefits coverage represents a complete solution to larger issues of affordable access to healthcare and health coverage,” the rule says.
The Association for Community Affiliated Plans, which represents safety-net health plans and has lobbied the White House on the short-term plan restrictions, cheered the 182-page rule for increasing consumer protections.
“It’s time to make it clear that junk insurance is no substitute for the real thing,” said ACAP CEO Margaret Murray in a statement.
Surprise billing
The Biden administration also announced new guidance on surprise medical bills. Regulators have struggled with implementing the No Surprises Act that passed in 2020, as hospitals and insurers continue to face off over the negotiation process to resolve payment determinations.
The new guidance would limit payers’ ability to claim hospitals they contract with are not actually in-network, which can result in higher fees for consumers.
Healthcare services are either out-of-network and subject to surprise billing protections, or in-network and subject to the ACA’s annual limitation on cost-sharing, the administration said.
Health plans and providers will also have to disclose facility fees — charges for care provided at non-hospital, but hospital-owned, sites — to consumers, along with other price information. In addition, providers and emergency facilities can’t sidestep the No Surprises Act, including its prohibition on balance billing, by renaming prohibited charges as facility fees.
“What they are doing is gaming the system. This is not allowed,” Tanden said.
Also on Friday, the Treasury Department and Consumer Financial Protection Bureau said they’re looking to learn more about medical credit cards and loans in advance of potential policy actions.
The cards, which providers can offer patients when they can’t pay their medical bills, often come with lower teaser rates and deferred interest options that can result in higher costs for patients, according to the administration.
Biden is expected to discuss the measures in a speech Friday afternoon.
