Consumer / Employer, Payers

Biden Administration Takes Action Against Junk Insurance, Surprise Bills

The Biden Administration is proposing that short-term health plans are limited to three months, or a maximum of four months if they’re extended. It comes after the Trump Administration allowed members to stay on the plans for 12 months and renew them for three years. The plans are often limited in coverage and leave consumers with high medical costs.

The Biden-Harris administration announced Friday that it is taking a series of steps to lower healthcare costs for consumers, including cracking down on “junk” insurance.

Junk insurance refers to short-term health plans that are often lacking in coverage like mental health and prescription drugs, and they don’t have consumer protections like coverage of pre-existing conditions. These plans “leave families surprised by thousands of dollars in bills, often because the insurance plan claims they have a pre-existing condition that isn’t covered,” according to a White House fact sheet. These plans were limited to three months by the Obama administration, but the Trump administration allowed members to stay on the plans for 12 months and renew them for three years.

Now, the Biden Administration is proposing that these short-term plans are limited to three months, or a maximum of four months if they’re extended.

“‘Short-term’ plans must be truly short-term,” the fact sheet stated.

In addition, these plans will have to provide a disclaimer that clearly explains the limits of their benefits. They will have to give this disclaimer to new consumers as well as existing consumers of these plans.

A group of 37 organizations — including the American Heart Association and the National Health Council — issued a joint statement applauding the Biden Administration for the proposed rule.

“This proposed rule would offer safeguards against short-term health plans, which have proliferated following a 2018 federal rule change that many of our organizations opposed. Though marketed as affordable health insurance, short-term health plans don’t adhere to key consumer protections and leave patients vulnerable to enormous medical bills,” the organizations said. “The plans are so risky that many of our organizations warned of their threat to patients and repeatedly urged the federal government to take action.  

“This proposed rule would return short-term health plans to their original purpose: a temporary backstop some consumers may purchase while in between health insurers.”

In addition to the proposed rules for short-term plans, the Biden Administration also announced guidance on rules for surprise medical billing. The No Surprises Act, which went into effect in January 2022, protects patients from receiving surprise medical bills. However, some players are still “gaming the system,” which the Biden Administration is trying to address through the new guidance. For example, some health plans will contract with hospitals but try to claim that they’re not “technically in-network.” 

“The Administration today is making clear this is not allowed under federal law: health care services provided by these providers are either out-of-network and subject to the surprise billing protections, or they are in-network and subject to the ACA’s annual limitation on cost-sharing, further protecting consumers from excessive out-of-pocket costs,” the fact sheet stated.

Patients are also frequently charged “facility fees” for services provided outside of hospitals, which often come as a surprise for consumers. The Administration is now requiring health plans and providers to make facility fees publicly available.

Another action the Administration took is a request for information on the use of third-party medical credit cards and loans, which healthcare providers are offering to help patients pay for care.

“These credit cards often include teaser rates and deferred interest features that lead to higher costs for consumers, and may be offered even when low- or no-cost alternatives, such as zero-interest payment plans, financial assistance, or health coverage may be available,” the fact sheet stated. “Health care providers may be promoting these products because they could allow providers to get paid faster, outsource servicing and collections costs to third parties, receive a higher payment from consumers who otherwise would pay a discounted price for care, and in some circumstances, receive a share of the interest revenue gained by the third-party financial company.”

The Biden Administration also released new data that show about 19 million seniors and Part D beneficiaries will save $400 a year on prescription drugs from Biden’s new spending cap. The cap limits out-of-pocket spending to $2,000 a year and will go into effect in 2025.

Photo: JamesBrey, Getty Images