The Biden administration is going after what it calls “junk insurance” as part of its plan to lower health care costs for American consumers.

In July the Health and Human Services, Treasury and Labor departments issued proposed rules that would limit short-term health plans to three months, with an option to be renewed for only one month. Initially created during the Obama administration, the short-term health plans were meant to be used during transition periods, such as times when people are between jobs, and were limited to 90-day periods.

Under the Trump administration in 2018, the 90-day limit was expanded to up to three years in what the administration described as an effort to provide more affordable alternatives to Affordable Care Act (ACA) plans and what Democrats described as an effort to diminish the ACA. “Short-term plans are intended to provide temporary coverage as people transition from one source of coverage to another,” Neera Tanden, White House domestic policy adviser, said on a call with reporters in July.

“Under the previous administration, however, companies were able to take advantage of loopholes and sell junk insurance for much longer than intended.” Those in favor of limiting the short-term plans argue that they offer little to no coverage and do not always cover preexisting conditions — leaving many consumers with unexpected and often exorbitant medical costs.

The White House gave the example of a Montana man who received a bill for $43,000 because his plan considered his cancer a preexisting condition. “Short-term, limited-duration insurance and other non-ACA-compliant plans offer a false sense of security that threatens consumers’ physical and financial health,” Margaret A. Murray, CEO of the Association for Community Affiliated Plans, said in a statement. “They trick customers with low premiums, only to force them to swallow skimpy or even nonexistent coverage. The result is people pay a lot more money — and in return, often receive far less coverage than they are led to believe they’ve purchased.”

The group sued the Trump administration in 2018 to try and stop the expansion of these plans but lost in federal appeals court.

The Biden administration’s targeting of short-term health plans is part of its larger effort to cut down on hidden fees in a number of industries, including hotels, airlines and banks, to save Americans money in the face of rising inflation. “It’s not necessarily about health care, it’s about being played for a sucker,” Biden said during a White House event announcing the policies. “That’s a scam and it has to end.”

Opponents of the proposed rules, however, argue that they could reduce innovation in the health insurance market and reduce Americans’ choices when selecting a health plan. Biden is “taking a hatchet to consumer choice” while “propping up the costly, rigid plans offered under the Affordable Care Act,” Rep. Virginia Foxx (R-N.C.), chair of the House Education and Workforce Committee, told reporters in response to the announced changes.

Rita Numerof, a business strategy consultant and advocate for change in the U.S. health care system, argues that many Americans who enroll in short-term health plans largely know what they are signing up for and are doing so to save money or wait out a life transition.

“Short-term health plans are a flexible option for generally healthy people who are between jobs, self-employed or waiting for Medicare eligibility, and want protection against unforeseen, catastrophic medical situations,” Numerof wrote in a Forbes op-ed. She further argued that the Biden administration’s proposed rules are essentially a way “to coerce people into buying things they either don’t want, don’t need or can’t afford.”

Rather than eliminate short-term plans, Numerof encouraged a shift in Americans “to act more like consumers and less like patients” by doing more research and asking more questions of potential providers about the total cost of care and need for certain procedures to reduce the likelihood of unexpected health care costs.

“At a time when the nation is getting sicker and consumers are shouldering more of their health care costs and desperately looking for alternatives to the current system, the last thing we need is a regulatory proposal that could leave many Americans uninsured.” The proposed rules await finalization, which will come after the public comment period closes on Sept. 11.

If the rules are finalized, individuals currently enrolled in short-term plans would be able to remain on the plan for the duration of the coverage limit, at which point they would need to select a longer-term option.

For more background, see the March 2016 issue of Congressional Digest on “Obamacare Update.”