Biden Administration Proposes Limit On Skimpy Health-Insurance Plans

WASHINGTON – The White House is moving to constrain use of skimpy health plans that have been derided for years as junk.

The proposal, part of a presidential recitation Friday of recent federal steps to improve Americans’ health care, comes after congressional Democrats and consumer-health advocates have pressed Biden as long as he has been in office to act on a long-standing pledge to reverse his predecessor’s expansion of the short-term health plans, which are designed as limited-duration products.

The proposal is the latest shift in an ideological seesaw with significant implications for consumers. For close to a decade, politicians, policy experts and ideological groups have debated what is best for consumers who buy coverage on their own, rather than getting benefits through a job. Many conservatives, some of whom have opposed the Affordable Care Act since its origins in 2010, contend that those consumers deserve easy access to health plans that provide a little coverage at little monthly cost. But ACA proponents contend that such arrangements can cost patients more in the long run while detracting from the goal of helping more Americans get comprehensive medical insurance.

The short-term plans charge lower monthly premiums than standard forms of health insurance in exchange for scanty benefits. The plans do not need to comply with consumer protections provided under the Affordable Care Act, including equal treatment of patients with preexisting medical conditions and coverage of 10 categories of health benefits, such as maternity care, mental health services and prescription drugs. The plans also sometimes impose yearly limits on coverage.

“That’s not health insurance. That’s a scam,” Biden said during remarks in the East Room. “That’s a scam that has to end.”

When they were created, the short-term plans were intended as a bridge for consumers who found themselves in a difficult moment, such as during a brief gap between jobs that provide health benefits. The Obama administration in 2016 limited the plans’ duration to three months.

In 2018, Trump expanded availability of the plans, allowing consumers to carry them for 12 months at a time and then to renew them for up to three years. Trump’s top health aides said the plans would be appropriate for families not needing much medical care. Critics countered that patients risked being burdened with large medical expenses after the meager coverage ran out. There are no reliable data on how many Americans have purchased such plans.

In recent years, roughly half the states have essentially banned the sale of such plans or restricted them to the previous three-month limit. The current administration’s proposed rules would mark a reversal of Trump’s policy nationally.

The proposal would not revert exactly to the Obama-era version but would be close. Consumers could buy a short-term plan for three months and could extend for a fourth month. The plan would be required to disclose to customers, clearly and upfront, exactly what it covers. The rules would apply to people who buy short-term plans in the future, while those who already have the skimpy insurance could keep it under the current rules.

Senior administration officials who briefed reporters before the president spoke said the proposal will probably reach a final form later this year, after the public is given time to comment on it.

Biden, who believes the ACA should be the basis of improvements in health-care costs and availability, has been among many Democrats who favor a far smaller role for short-term plans. Until now, his administration had not acted on that belief, despite appeals from fellow Democrats and advocates to move more swiftly.

A senior administration official sidestepped the question of why it has taken until now to produce the draft rules restricting short-term health plans. Biden did not mention the timing.

The proposal on skimpy health plans is part of a quartet of steps that Biden highlighted Friday to illustrate his focus on expanding access to affordable medical services and controlling health-care costs – a long-standing priority of his that has assumed fresh significance now that he is seeking a second White House term.

“I’m just tired of seeing Americans ripped off,” Biden said as he concluded the remarks in which he characterized his administration’s health-care policies as part of his economic agenda to restore the American Dream.

Other aspects remain works in progress.

One will be a joint exploration by three federal agencies into the use and marketing of specialty financial products, such as medical credit cards and installment loans. Senior administration officials said those mechanisms sometimes appear to be pushed on patients as a way to pay for routine medical care, with ballooning interest rates and growing medical debt.

Another measure involves further specifics on a recent law to help shield patients from large, unexpected medical bills. The protections were enacted as part of a 2020 pandemic relief law, predating Biden’s tenure. They took effect in early 2022, and Biden’s health officials have drafted details of how the law is carried out.

The medical billing law is intended to protect patients financially who go to emergency rooms or need other types of medical care without realizing that doctors treating them are not part of their insurance network. The senior administration officials said the new guidance is intended to prevent health-care institutions and practitioners from exploiting loopholes that can obscure whether patients are using expensive care outside their insurance network.

Biden also cited a new estimate from the Health and Human Services Department of the number of older Americans and people with disabilities who will save money on Medicare drug coverage once a new ceiling on out-of-pocket prescription drug spending in that federal insurance system begins. That annual $2,000 ceiling, which takes effect in 2025, was part of the Inflation Reduction Act adopted a year ago.

The president noted the HHS report predicts that nearly 19 million people with Medicare drug benefits will save an average of $400 a year per beneficiary. Overall, the cap will reduce Medicare beneficiaries’ spending on prescriptions by about $7.4 billion annually, the report estimates.

The proposal to rein in short-term health plans inflamed the debate that has always surrounded this alternative insurance.

Conservative health policy specialists immediately denounced the Biden administration’s proposal.

“Short-term plans provide quality, affordable coverage for millions of people, reduce the number of the uninsured, help people who get sick and – contrary to the critics – do nothing to undermine” the ACA insurance marketplace, said Brian Blase, an economic policy adviser in the Trump White House who led the work to broaden the availability of such plans.

Michael F. Cannon, director of health policy studies at the libertarian Cato Institute, predicted that some consumers could end up stranded without any insurance if the short-term plans are restricted to four months. Depending on when during a year that coverage ran out, he said, people who fall ill could “face sky-high medical bills” while uninsured for many months. That is because consumers can buy ACA marketplace insurance, which the current administration favors, only during an enrollment period late every year. Under the proposal, Cannon said, consumers in that circumstance would not qualify for a special enrollment time to get ACA coverage sooner.

On the other hand, Keep US Covered, a pro-ACA group that has urged Biden to narrow use of short-term plans, praised the proposal.

“President Biden has made progress to improve health equity with this decision,” said Sonja Nesbit, an Obama administration health official and senior adviser for Keep US Covered. In a statement, Nesbit said that the Trump-era rule “flooded the market with low-quality insurance plans that skirt patient protections.”

“Today,” Nesbit said, “our health care system is stronger and American families can have more confidence in their coverage.”

(c) 2023, The Washington Post · Amy Goldstein