The Biden administration recently put in place a new rule restricting the availability of short-term health insurance plans, which could raise costs and leave many without coverage, experts told the Daily Caller News Foundation.
The rule amends the definition of a short-term, limited-duration insurance (STDLI) plan so that the initial contract extends only three months with a possible one-month extension, down from the previous allotment of 12 to 36 months, accordingto the Centers for Medicare and Medicaid Services. Restricting access to the plans, which are common for people switching jobs, is poised to raise prices in some markets due to a loss of consumer choice while also threatening to leave many Americans without coverage who get kicked off their STDLI plan at its termination, according to experts who spoke to the DCNF.
“The first effect will be to strip consumer protections from short-term plans,” Michael Cannon, director of health policy studies at the Cato Institute, told the DCNF. “Requiring insurers to terminate such plans after just four months eliminates consumer protections by protecting consumers from financial risk for shorter periods. The second effect is that this rule change will terminate coverage for people after they get sick and leave them uninsured for up to 12 months. When consumers enroll in a short-term plan and then fall ill, this rule will terminate their coverage within four months. They will then be unable to purchase new short-term plans because their illnesses will have become uninsurable preexisting conditions.”
A large issue with the restrictions on short-term plans is that the Affordable Care Act (ACA), often called “ObamaCare,” has a limited enrollment window, ending in most states in early January and not opening again until November, leaving many unable to enroll during certain parts of the year. Only certain groups can enroll in ACA-complaint health plans year-round, including American Indians, Alaska Natives, those eligible for Medicaid or the Children’s Health Insurance Program and people falling under certain state-specific programs.
“The limited open enrollment is part of the problem. People will have a short-term plan canceled and then have no ability to buy an ACA plan,” Brian Blase, president of Paragon Health Institute and former special assistant to the president’s Economic Policy Council in the Trump administration, told the DCNF. “There are a lot of other problems. Short-term plans typically have much lower premiums and much better provider networks. So, this rule will lead people to have fewer options for health insurance. The main groups negatively affected by this rule change are the self-employed and 1099 contract workers.”
The previous rule extending the available length of short-term plans was first instituted by the Trump administration in 2018, as STDLI plans are exempt from certain consumer protections in the ACA, such as those on pre-existing conditions, that could expand coverage but raise costs, according to CNN. The change is part of a larger attempt by the Biden administration to lower health care costs, with the president also putting controls on what companies can charge for certain drugs.
The Biden administration has called STDLI plans “junk health insurance,” claiming that they confuse consumers with what coverage they really provide, with the rule change requiring insurers to clearly outline what they cover and what they don’t. President Joe Biden has repeatedly blamed “junk fees” as the cause of much of America’s woes, similarly lowering the cap on credit card fees in early March from $32 to $8, despite broader economic issues driving price increases as opposed to fees.
“The rule will drive some people to the ObamaCare Exchanges, which appears to be the purpose of inflicting all this harm,” Cannon told the DCNF. “The Biden administration estimates that the rule will drive enough healthy people into the Exchanges that ObamaCare plan premiums will come down by 0.5%.”
It is not clear how many people are currently enrolled in STDLI, as insurers are not required to report on the number of people using them, according to the National Association of Insurance Commissioners (NAIC). The NAIC estimates that at the end of 2022, there were over 235,000 people enrolled in short-term plans.
In a paper on the subject, Blase found that states that did not have their own strict rules on short-term plans had an average decline of 3% in premiums on the least expensive plan offered from 2018 to 2023. States that did not have a favorable regulatory environment had around a 5.6% increase in the average cost of the cheapest plan.
“The winners are the private health insurance companies that sell ObamaCare plans,” Cannon told the DCNF. “They met with the administration in May 2023 and urged the administration to terminate short-term plans after four months…The Biden administration is quite literally terminating coverage for sick patients in order to enrich private insurance companies.”
The White House did not immediately respond to a request to comment from the DCNF.
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