Regulators investigate changes to short-term health and fixed indemnity policies

A new lineup of actions proposed by the Biden administration will attempt to lower healthcare costs across the country. These regulations will target short-term health insurance plans, fixed indemnity plans, how insurers categorize providers, and medical credit cards.

Shorter terms on short-term coverage

Initially, short-term limited duration insurance (STLDI) was designed to be a sort of stop-gap coverage for those who were migrating between plans. A 26-year-old man waiting to hear back from a potential employer might grab one of these, for example. These renewable plans, as they function today, can span as long as 36 months.

The new regulation would return the limit on these plans back to a standard of 3 months. One extension would cap the absolute longest lifespan of these plans to four months. So no renewal guarantees or “stacking” of plans: consumers won’t be permitted to continually sign up for STLDIs or purchase more than one at a time.

Marketing for these plans would not be able to contain terms such as “Obamacare” or “ACA enroll.” Since they are off-market, these plans do not need to adhere to the standards enforced by the Marketplace, so they might not include things like essential health benefits or cover pre-existing conditions. In fact, regulations would go as far as to say applications for these plans must carry a disclaimer denoting this.

Somewhere between 1-3 million Americans are currently enrolled in a STLDI, citing lower costs as a main factor. If you’re predicting a lot of people coming to your office door wanting an individual policy a few months after this regulation hits the books, you’d probably be right.

Fixed indemnity

On the opposite side of the spectrum, these ancillary products might behave too much like credible coverage. Also referred to as hospital indemnity, fixed indemnity plans were designed to replace the income of consumers if they wound up in the hospital and were unable to work.

In order to keep these plans in line with their original design, new regulations would prohibit these plans from distributing benefits on any per-service basis, limiting this type of coverage to a flat per-period payment structure. In short, plans will have to pay out defined benefits, such as a lump sum every day regardless of why the consumer is in the hospital or what happens during that stay.

Biden’s administration also has its eye on who receives the payment in this structure. Some plans currently require payments go directly to the provider first, then the consumer receives the leftover cash--if there is any. This allows any surprise bills to be taken from that lump sum before those bills can be disputed, leaving less opportunity for consumers to actually get that paycheck replacement. While this is not in the regulation yet, more research is being done to see if any additional guidance is needed.

Surprise billing

While surprise billing was tackled for the first time back in 2021, it’s still finding ways to rise back up.

Health plans would be required to deem a provider either "in-network" or "out of network" -- categories like "participating provider" would no longer be acceptable. This should prevent confusion for consumers subscribed to plans contracted with out-of-network hospitals.

"Facility fees" charged in emergency rooms must be transparent to the consumer and are forbidden for use as a vehicle to recoup revenue previously collected with "participating provider" coverage.

Medical credit cards

Finally, the Biden administration looks to address gray areas surrounding an increasingly popular way to pay off medical debt. Consumers left with a hefty bill after a procedure might be encouraged by providers to use medical credit cards to speed up the payment process. However, deferred interest and high fees might lead to a higher overall grand total.

These credit cards were originally designed to help consumers pay for elective procedures such as fertility treatments and cosmetic surgery. However, the increased use of these credit cards for other types of medical care alarms experts. Once more information has been provided, the Biden administration plans to make a decision on how to move forward with these potentially predatory practices.

When, though?

No timeline has been announced as to when these rules might come into play. However, the press release announcing these proposals did take the time to remind us that price negotiations planned from the Inflation Reduction Act of 2022 will begin starting in September.