The HHS Released Final Rules to Limit 'Junk Insurance' Scams, Protect Consumers and Lower Healthcare Costs

Today, the Biden-Harris Administration took action to lower healthcare costs and protect consumers by removing barriers that prevent health insurance companies from misleading consumers into purchasing lower quality insurance that can discriminate based on pre-existing conditions and offer little to no coverage.

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The Departments of Health and Human Services (HHS), Labor, and the Treasury, or The Departments, have released final rules on short-term, limited-duration insurance (STLDI) and independent, non-coordinated excepted benefits coverage, addressing issues related to the low-quality insurance, or "junk insurance" plans, according to a news release by the HHS.

STLDI was created to bridge gaps in coverage during transitions between insurance plans.

However, unlike typical health insurance plans, STLDI lacks key consumer protections mandated by the Affordable Care Act (ACA), such as guaranteed coverage for pre-existing conditions and the prohibition of discrimination based on health status, age or gender.

According to the release, the final rule will now limit “short-term” plans to no more than four months rather than three years, and require that health insurance companies provide transparent and upfront information about the coverage consumers are expected to be purchasing.

Short-term plans and "fixed indemnity" insurance policies, which offer a set cash payment for medical events, must now include simple, easy-to-understand notices on all marketing and enrollment materials. This helps consumers make informed decisions about their coverage.

CMS Administrator Chiquita Brooks-LaSure stated in the release that the increase in consumer understanding of STLDI and fixed indemnity excepted benefits coverage, along with the adjustment to short-term plans to be short term, will help people become more informed about the risks of these coverage types and their choices for comprehensive coverage.

Jessica Brooks-Woods, CEO of The National Association of Benefits and Insurance Professionals (NABIP), said in a NABIP release that their organization’s members who currently sell STLDI plans report that these consumers “typically lack access to group coverage and are ineligible for exchange-based individual market premium tax credit subsidies, seeking lower-cost options.”

Brooks-Woods added that employers and employees can now continue to use these plans to offset high out of pocket costs.

According to CMS, beginning September 1, 2024, the new short-term health insurance plans will have the maximum duration of four months, while existing plans sold before this date can continue with initial terms of less than 12 months and a maximum of up to 36 months, as allowed by state laws.