HHS proposed rule targets 'junk' health insurance plans

Photo: Jose Luis Pelaez Inc/Getty Images

Junk health plans are in the crosshairs of the Department of Health and Human Services, which pledged this week to protect consumers from such plans, surprise medical bills and excess costs that lead to medical debt.

According to the Leukemia and Lymphoma Society, patients with preexisting conditions are often saddled with low-quality policies that are exempt from some consumer protections – i.e., junk plans.

HHS and the Departments of Labor and Treasury are attempting to tackle the issue by issuing proposed rules aimed at distinguishing short-term, limited-duration insurance (STLDI) and fixed indemnity insurance (plans that pay a predetermined fixed amount for a health-related event, regardless of expenses incurred) from comprehensive coverage.

"STLDI and fixed indemnity insurance sometimes include benefit limitations, and are sold by employing dubious marketing practices, that render such coverage as nothing more than junk," said HHS.

Since these types of plans are not subject to many of the Affordable Care Act's consumer protections, HHS said that individuals may unknowingly end up in plans that do not cover essential benefits like prescription drugs, exclude coverage for preexisting conditions, or impose annual or lifetime dollar limits on services.

Such non-comprehensive coverage, the agency maintained, can be particularly harmful to low-income individuals and people with significant healthcare needs, because such people would face the greatest health and financial consequences from inadequate insurance coverage.

The proposed rule, among other policies, would amend the federal definition of STLDI to ensure these "short-term" plans are truly short-term, and are used to fill temporary gaps in comprehensive coverage. It would also require STLDI and fixed indemnity excepted benefits coverage to make clearer to consumers the differences between these products and comprehensive coverage, including what is covered and how much is covered.

WHAT'S THE IMPACT?

Margaret A. Murray, CEO of the Association for Community Affiliated Plans (ACAP), said her organization expects the administration will put an end to the junk plans.

"Short-term, limited duration insurance and other non-ACA-compliant plans offer a false sense of security that threatens consumers' physical and financial health," said Murray. "They trick customers with low premiums, only to force them to swallow skimpy or even non-existent coverage. The result is people pay a lot more money – and in return, often receive far less coverage than they are led to believe they've purchased. That's why we sued to stop the expansion of these plans."

Murray said that junk plans qualify as neither affordable nor high quality, and routinely leave basic health services uncovered while sticking members with bills for high-cost procedures.

"Short-term plans were created to fill in brief gaps in coverage for workers as they moved between jobs," she said. "They were never designed to work as comprehensive coverage – as the last few years have proven."

THE LARGER TREND

A little over a year ago, in April 2022, House Democrats called on HHS to end junk plans, imploring Secretary Xavier Becerra to reverse the final rule issued by the Trump administration that expanded the short-term, limited duration plans and restore them to their intended purpose as short-duration, temporary coverage.

The Obama Administration had limited the duration of STLDI plans to less than three months. However, in 2018 the Trump Administration issued a final rule that allowed individuals to purchase STLDI plans for up to a year, with up to three years of renewable coverage.

One analysis of STLDI plans found that 43% of plans surveyed failed to cover mental health services, 71% of plans did not cover outpatient prescription drugs and no plans covered maternity care.

Back in 2020, an appeals court upheld the sale of limited duration insurance plans championed by the Trump Administration. The court said the sale of short-term insurance plans is neither contrary to law nor arbitrary and capricious.

Twitter: @JELagasse
Email the writer: Jeff.Lagasse@himssmedia.com