Biden rolls back Trump expansion of short-term 'junk' insurance plans

The Biden administration is cracking down on insubstantial health insurance plans that don't have to meet ObamaCare’s consumer protection requirements. 

A final rule issued Thursday would roll back a Trump-era policy that drastically expanded what Biden officials and critics call “junk” plans. 

The final rule limits the duration of the insurance plans to three months, with the option of a one-month extension. Plans will also be required to provide consumers with a clear explanation of the limits of the coverage they provide. 

People being sold short-term plans have often been told they are cheaper than ObamaCare-compliant coverage, but not about the limits of coverage. So people with preexisting medical conditions could be charged more or even denied coverage.  

Short-term plans were originally meant to be temporary safety nets to help people avoid gaps in health coverage, for example if they were transitioning between jobs. The Obama administration passed regulations aimed at limiting their use, imposing a limit of less than three months.  

But after the Trump administration failed to repeal the law, it issued regulations making short-term plans more accessible in an effort to weaken the law. People could stay on the plans for a year, and they could be renewed for up to three years, rather than three months. After that, they could apply again and renew for another three years. 

Democrats and other critics have derided these plans as “junk” insurance plans that undermined the Affordable Care Act (ACA) by creating a parallel market. Healthy people would have an incentive to ditch more comprehensive ACA plans for cheaper coverage, driving up costs for the sicker people who remain on ACA exchange plans.   

The White House is framing the rule as part of the Biden administration’s efforts to reduce costs for consumers. 

“These junk insurance plans misled consumers into thinking they are buying real health insurance,” Neera Tanden, a White House domestic policy adviser, told reporters. “Then when people need medical care, they found out their plans cap their benefits, that their care is related to a preexisting condition, that their care just isn’t covered at all.” 

Senior administration officials said the new rule will apply only to new plans, not existing ones.

But conservatives argue the policy will only harm consumers by eliminating a way for people to get cheaper coverage. 

“It will create gaps in coverage into which sick patients will fall mid-treatment. It will force those patients to face medical underwriting and up to 12 months with no insurance. It will increase the number of uninsured by half a million lives,” said Michael Cannon, director of health policy studies at the libertarian Cato Institute. 

“This new rule is what people hated most about Obamacare, taking away their choices and forcing Americans into a one-size-fits-all approach,” Sen. Bill Cassidy (R-La), ranking member of the Senate Health Committee, said in a statement. “In this case, the requirement will be to go from something cheaper to something more expensive. Americans want affordability.”