The Biden administration wants to limit short-term, limited-duration insurance (STLDI) to four months with no option to renew.
The proposed rule, announced on July 7, would restore limits imposed by the Obama administration in 2014. President Donald Trump removed those limits by executive order, to allow plans to last one year with two years of renewal.
Congress failed to pass legislation making the expansion permanent, setting the stage for Biden’s reversal of the reform. After a 60-day comment period, Biden’s plan would take effect on January 1, 2024.
Lower Cost, Broader Networks
STLDI is a type of health insurance designed to fill gaps in coverage. The plans are a fraction of the cost of Obamacare plans and offer broader coverage networks. Consumers can purchase the plans at any time during the year and can choose from a variety of deductibles and co-pays.
STLDI is cheaper because the plans are not subject to the same coverage requirements as Obamacare plans. STLDI is attractive to consumers who have no health problems but want financial protection in case of a catastrophic health event and are not covered by an individual plan.
The Trump rule allowed even more protection by giving consumers the option to repurchase the plan for up to two more years at the same price, even if they became sick. Under Biden’s proposed rule, the plans will “cancel” at four months and consumers will have to apply again from scratch. The new plan would not cover any ongoing health treatment.
The only option at that point would be for the person to wait to sign up for an Obamacare plan, enrollment for which is open only for a limited time each year. Additionally, the Obamacare plan might not cover the same providers.
“The Biden regulation will keep families from buying health insurance that meets their financial and medical needs,” said John C. Goodman, president of The Goodman Center for Public Policy Research and co-publisher of Health Care News.
Threat to Obamacare
Biden has called STLDI “junk insurance.”
“New proposed rules would close loopholes that the previous administration took advantage of that allow companies to offer misleading insurance products that can discriminate based on pre-existing conditions and trick consumers into buying products that provide little or no coverage when they need it most,” a Fact Sheet from the White House states. “These plans leave families surprised by thousands of dollars in medical expenses when they actually use health care services like a surgery.”
Obamacare plans are the real “junk insurance,” says Michael Cannon, director of health policy studies at The Cato Institute.
“For one, Obamacare plans are driving consumers to short-term plans because short-term plans offer broader provider networks,” said Cannon. “If the goal is to increase the number of insured, STLDI does it. The plans reduce the number of uninsured by one to 2.3 million people.
“By limiting STLDI, President Biden is literally trying to mandate the very practice of stripping coverage from the sick that he said Obamacare would end,” said Cannon. “It’s the equivalent of requiring automakers to rip airbags and seat belts out of cars.”
‘Anti-Consumer and Anti-Patient’
Deductibles are prohibitively high under Obamacare, says Joel White, president of the Council for Affordable Health Coverage.
“The typical deductible on an Obamacare ‘silver’ plan, on top of what the consumer is already paying in premiums, is $4,753, while the average deductible on a high-deductible employer plan linked to a health savings account (HSA) is about half that,” said White.
“Congress has pursued policies to weaken employer coverage while encouraging people to join Obamacare,” said White. “Pursuing an agenda to put more people in a program where they pay more and get less access to doctors and drugs isn’t compassionate; it’s fundamentally anti-consumer and anti-patient.”
Tailored to Needs
STLDI is not the problem, it’s the solution, says Goodman.
“Short-term health plans have been around for many years, and they’ve been attractive because they only cover risks that people care about,” said Goodman. “The plans can exclude people with preexisting conditions, they may not cover prescription drugs or maternity care or substance abuse, and this is fully disclosed. Buyers of the plans don’t want to pay for something they don’t think they’ll need.”
Limiting short-term plans serves political interests, not the public, says Goodman.
“The Biden administration, like the Obama administration, views STLDI as a threat,” said Goodman. “Obamacare plans thrive on getting healthy people to pay higher premiums to subsidize the sick, who can jump onto the plans even after they get sick. STLDI offers an escape plan for people who don’t want to pay for coverage they don’t want or need and if they do need it, don’t want to be restricted by Obamacare’s narrow networks.
“It’s amazing Republicans did not lock in the Trump reforms when they had control of Congress,” Goodman said.
Legal Issues
Cannon says it is not clear the Biden administration has statutory authority to limit STLDI.
“The change defies a 2020 ruling by the U.S. Court of Appeals [District of Columbia Circuit] which stated, ‘nothing in [federal law] prevents insurers from renewing expired STLDI policies,” said Cannon.
Goodman says STLDI could be a key part of real health care reform.
“Let STLDI function as an unregulated market, give everyone the same tax relief regardless of what insurance market they choose, let Obamacare function as a quasi-risk pool with subsidies to keep premiums affordable for the really sick, and let the exchanges offer specialty plans that cover specific health conditions,” said Goodman (see related article, page 21).
AnneMarie Schieber (amschieber@heartland.org) is the managing editor of Health Care News.