Biden Administration Finalizes Rule Curbing Use of Short-Term Health Plans

The Biden administration announced on Thursday that it had finalized a new regulation that curbs the use of short-term health insurance plans that do not comply with the Affordable Care Act, reversing a move by the Trump administration to give consumers more access to cheaper but skimpier plans.

Under the new rule, the short-term plans will be able to last for only 90 days, with an option for a one-month extension.

In 2018, the Trump administration issued a rule allowing the plans to last for just under a year, with the option of renewing them for a total duration of up to three years. Previously, under an Obama-era policy, the plans were required to last for less than three months.

The plans, often with lower premiums than those found on the Affordable Care Act’s marketplaces, do not have to cover people with pre-existing conditions. They are also free from the health law’s requirement that plans offer a minimum set of benefits, like prescription drug coverage and maternity care.

Democrats deride the so-called short-term, limited-duration plans as “junk” insurance, and the Obama-era policy was meant to ensure that healthy consumers could not use that option to sidestep the Affordable Care Act’s marketplaces, leaving a sicker pool of customers enrolling in the comprehensive plans offered under the health law.

The White House cast the new rule as a way to fortify the marketplaces. In a briefing with reporters on Wednesday, Neera Tanden, President Biden’s domestic policy adviser, said that 45 million Americans were now covered through the marketplaces or the expansion of Medicaid under the Affordable Care Act. More than 20 million people signed up for plans on the marketplaces during the most recent open enrollment period.

“President Biden is not taking his foot off the gas,” Ms. Tanden said.

Supporters of the short-term plans have said that the less expensive options are well suited for people who are unable to afford a marketplace plan. Brian Blase, who worked on the 2018 rule as a White House official under President Donald J. Trump, said the plans were also ideal for contract and self-employed workers, including those with incomes too high to qualify for more generous subsidies on the Affordable Care Act’s marketplaces.

Mr. Blase said the new rule could cause insurers offering marketplace plans to face less competition. Sick consumers buying a three-month plan could also lose coverage without a better immediate option, he added.

“Nobody benefits,” he said.

But critics of the short-term plans have warned that insurers can mislead consumers who enroll in them, including people who might be eligible for free coverage through the marketplaces. The new regulation requires insurers to provide a disclaimer explaining what the short-term plans cover.

In its announcement on Thursday, the White House cited a man in Montana who accumulated over $40,000 in health costs because his cancer was considered a pre-existing condition, and a woman in Pennsylvania who underwent an amputation and received roughly $20,000 in bills that her plan would not cover.

Sabrina Corlette, a research professor at Georgetown University’s Center on Health Insurance Reforms, said the plans often showed up prominently when consumers searched online for health insurance, with deceptive advertising.

“Often the marketing materials say they cover hospitalizations and prescription drugs,” she said. “To the average consumer it looks like a real health insurance plan.”

Georgetown researchers last year conducted a so-called secret shopper study, calling 20 sales representatives to ask about health plans for people who had lost Medicaid coverage and were eligible for free marketplace plans. They found that none of the representatives mentioned the availability of the free plans. The brokers often used aggressive and misleading tactics to sell short-term plans without providing written plan information, the researchers found.

Ms. Corlette said that brokers typically received higher commissions for selling short-term plans than they did for more comprehensive options.

As a consumer, she said, “you have to be so savvy and careful.”

After the Trump administration issued its rule in 2018, some states moved on their own to limit the sale of short-term plans. Democratic lawmakers urged the Biden administration to reverse the regulation, and the administration issued a proposed rule to do so last summer.