Biden-Harris Administration Protects Consumers from Low-Quality Coverage by Limiting “Junk” Health Plans

These actions build on the Biden-Harris Administration's effort to eliminate hidden fees and consumer traps in every sector of the economy.

Today, the Biden-Harris Administration is taking yet another action to lower health care costs and protect consumers from being scammed into purchasing lower quality insurance, or "junk insurance". The Biden-Harris Administration is closing loopholes to prevent health insurance companies from misleading consumers into buying health plans that discriminate based on pre-existing conditions and that provide little or no coverage when consumers need it the most. Today's action will protect families from receiving thousands of dollars in health care bills.

Specifically, the Departments of Health and Human Services, Labor, and the Treasury (collectively, the Departments) are releasing the Short-Term, Limited-Duration Insurance and Independent, Noncoordinated Excepted Benefits Coverage, or "Junk Insurance", Final Rules. Short-term, limited-duration insurance (STLDI) is a type of health insurance that is typically designed to fill temporary gaps in coverage when an individual is transitioning from one source of coverage to another. Unlike most health insurance plans, STLDI plans are not subject to the Affordable Care Act's (ACA's) critical consumer protections, including guaranteeing coverage for people with pre-existing conditions and prohibiting discrimination based on health status, age, or gender. Today's final rules will limit these "short-term" plans to truly short time periods, no more than four months instead of three years.

In addition, the final rule will require health insurance companies to be clear and up front with what consumers are buying. Short-term plans, as well as "fixed indemnity" insurance policies that provide a fixed, cash payment for a health care event, will have to include a clear, easy-to-understand consumer notice on marketing, application, enrollment, and reenrollment materials, so that consumers can make informed coverage purchasing decisions. The final rules increase transparency while helping to ensure that consumers do not mistakenly enroll in these types of insurance plans as substitutes for comprehensive coverage.

"HHS is cracking down on junk insurance plans to help consumers make informed choices and avoid mistakenly paying for a plan that does not provide them the coverage or protection they expect," said HHS Secretary Becerra. "Over the past three years, we have helped more people gain access to high-quality, affordable coverage - and more than 300 million Americans are covered for the first time ever. We want everyone to have the peace of mind that comes with having coverage that includes the protections and benefits they expect."

"CMS is committed to furthering the promises made by the ACA 14 years ago," said CMS Administrator Chiquita Brooks-LaSure. "By increasing consumer understanding of short-term, limited-duration insurance and fixed indemnity excepted benefits coverage and making short-term plans truly short term, people will be more informed about the risks associated with these types of coverage and their options for comprehensive coverage."

For more information on the final rules, you may read the fact sheet, here.

To view the final rules, visit the Federal Register.