By Cathy Zhang
Open enrollment for the health insurance marketplace begins on November 1.
Among the options available to consumers will be short-term, limited-duration insurance (STLDI), also known as junk insurance plans. The Trump administration facilitated the proliferation of these cheap, underprotective plans in an attempt to undermine the marketplace, and the Biden administration has yet to reverse that policy.
As part of the Biden administration’s public effort “to restore and strengthen Americans’ access to quality, affordable health care,” the administration needs to take executive action to protect consumers and eliminate junk plans.
What Exactly are Junk Plans?
What makes STLDI plans unique is that they are not subject to the ACA’s individual market reforms, including minimum coverage of essential health benefits, cost-sharing limits, and protections against rescinding coverage and denial of coverage based on pre-existing conditions. This enables insurers to offer cheap plans with extremely low levels of coverage that inadequately protect consumers, hence the term “junk plans.” It also means that insurers can cherry-pick the healthiest consumers in the market by turning away consumers with pre-existing conditions and rescinding coverage for individuals who become extremely sick.
This can come at a shockingly high cost to consumers. Numerous individuals have been faced with uncovered medical bills as high as tens of thousands of dollars while on STLDI. One patient who received a routine appendectomy was left with a $33,600 bill to pay on his own after his STLDI paid only $1,682.
Today, the risk of contracting COVID-19 and needing costly care adds to the urgency of protecting consumers from STLDI.
What the Trump Rule Did
Historically, STLDI was meant to fill temporary gaps in coverage, such as when an individual is moving between jobs and doesn’t have employer-sponsored insurance.
Before the Obama administration, STLDI was limited to plans that ran for less than 12 months. However, in 2016 regulators identified that insurers were selling “short-term” 364-day plans that were exempt from market reforms, but were being used as primary insurance. In addition to underinsuring consumers, these plans were distorting the risk pool for the rest of the market. By luring healthy individuals into cheap, underprotective plans, STLDI left regular ACA-compliant plans with disproportionately costly risk pools.
In an effort to protect consumers from relying on STLDI for primary coverage and to stabilize the market, the Obama administration shortened the length of time for STLDI from under 12 months to 90 days.
In 2018, the Trump administration not only reversed the Obama-era rule, but actively promoted STLDI in a final rule that extends the limit for plans back to 364 days and allows consumers to renew the plans to extend up to three years. Rather than serving as a backstop for coverage gaps, the 2018 rule promoted the use STLDI as primary coverage, once again putting consumers at greater risk of unexpectedly high health bills.
On top of this, in 2019 the Trump administration required health insurance navigators to promote STLDI as a condition for federal funding. The apparent intended effect was to actively undermine the rest of the market, which was ACA-compliant, by diverting healthy, lower-cost consumers to STLDI.
What Biden Has Done
So far, the Biden administration has not made any moves to reverse the 2018 Trump rule or eliminate STLDI, though some of the administration’s rulemaking seems to reflect an understanding that STLDI is not on par with traditional coverage.
In September, the administration issued a final rule that revises the guardrails for states seeking to waive certain ACA requirements under Section 1332 of the Affordable Care Act. For one of the guardrails, which requires state waivers to provide comparable levels of coverage, STLDI no longer counts as “coverage.”
And a recent proposed rule suggests a requirement that insurers offering STLDI disclose any direct or indirect compensation given to an agent or broker for enrolling individuals. However, the proposed rule does not actually limit insurers from paying brokers to enroll people in STLDI.
Health care interest groups have urged President Biden to reverse the Trump-era rule on STDLI, but for now, not-so-short-term junk plans remain on the market.