New Federal Rule Curbs Short-Term Insurance Plans

A new federal regulation will curtail the availability of short-term health insurance plans, also referred to as “skinny” or “junk” plans, that do not cover people with preexisting conditions and do not pay for even the most basic medical services. The rule was first proposed in July 2023 and finalized on March 28.  

These short-term insurance policies were originally meant to be a bridge for people who lose their health insurance because of a job loss or other circumstance. The idea was that these plans would provide catastrophic coverage until someone either was able to get insurance through a job or apply for coverage through an Affordable Care Act (ACA) marketplace. For years, the duration of these policies was limited to three months. But since mid-2018, insurers have been able to offer these plans for as long as three years.

These “misleading insurance products” can “trick consumers into buying products that provide little or no coverage when they need it most,” says a July statement from the departments of Health and Human Services, Labor and Treasury, which jointly proposed the new rule. The final regulation will limit the duration of these policies to three months, with the possibility of extending it by one additional month. It will also require that insurers more clearly explain what these policies cover and what they do not.

 “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,” a March 28 news release from the U.S. Department of Health and Human Services says.

‘Junk’ plans a poor choice for most older adults

These short-term plans are particularly problematic for older adults, says Brendan Rose, an AARP director of government affairs, especially because they don’t cover people who have existing health problems. Insurers are also able to charge older Americans much higher premiums for this type of health insurance than younger people.

“These policies don’t have consumer protections, don’t provide the 10 essential health benefits required by the ACA and they can discriminate against people with preexisting conditions,” Rose says. “They are called ‘junk’ plans for a reason.”