Last week, the Biden-Harris administration released a proposed rule that would limit the sale of short-term, limited-duration insurance (STLDI) or “junk” health plans. STLDIs lack the consumer protections of plans that comply with the Affordable Care Act (ACA) and can expose enrollees to unlimited costs and significant debt.
Junk plans can be attractive because they usually appear more affordable than comprehensive coverage. Unfortunately, this low cost comes at a price. STLDIs use underwriting—assessing an applicant’s health status—to determine whether someone can buy a policy and for how much. The plans can also deny coverage for pre-existing conditions, and most do not cover prescription drugs or mental health care. They also often cap how much they will pay. These gaps and limitations can hinder access to care and leave enrollees on the hook for the rest of the charges, often unexpectedly.
The plans also mislead potential enrollees through deceptive advertising and barriers that prevent people from cancelling the policies.
Initially, junk plans were intended to be a stopgap during transitions between other, comprehensive forms of coverage and could only be sold for three months with no opportunity for renewal. President Trump’s administration changed the rules, increasing the maximum policy term to one year and making them renewable for up to three.
As a result, and as we feared, junk plans, and the problems they cause, proliferated.
The proposed rule would move junk plans back into the role of temporary insurance by limiting them to a three-month term and a maximum coverage period of four months, including any extensions or renewals. The rule would also close loopholes that allow insurers to evade these duration limits and make other definitional changes to reduce the financial risk associated with relying on a junk plan as a long-term alternative to comprehensive coverage.
At Medicare Rights, we opposed the expansion of junk plans and welcome moves to curtail their appeal and availability. While the plans may look like a bargain, they are anything but. They ultimately do little to protect consumers from the risks of significant costs from illness or injury.
This is a long-overdue step, but more must be done to ensure that health coverage is comprehensive and affordable for everyone. We urge policymakers to build on these and other recent reforms, like the Inflation Reduction Act, to minimize costs and maximize coverage.
Read the proposed rule and fact sheet.
Read our policy recommendations to the Biden-Harris administration.
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