Biden is announcing a new rule to protect consumers who purchase short-term health insurance plans

President Joe Biden on Thursday announced new steps to protect consumers who buy short-term health insurance plans that critics say amount to junk.

A new rule finalized by the Democratic president’s administration will limit these plans to just three months. And the plans can only be renewed for a maximum of four months, instead of up to the three years that were allowed under Biden’s predecessor, Republican Donald Trump.

The Biden administration is also requiring short-term plans to provide consumers with clear explanations of the limits of their benefits.

The White House said the rule is part of Biden’s efforts to reduce costs for consumers, which he has been promoting extensively as he seeks reelection in November.

“The president really believes the American people do not want to be taken for suckers and junk insurance takes them for suckers,” Neera Tanden, Biden’s domestic policy adviser, said during a call the White House arranged to discuss the rule with reporters.

Short-term insurance is meant to be temporary, providing a safety net for consumers as they transition between jobs, for example, or retire before they are eligible for Medicare.

But short-terms plans — critics call them “junk insurance” — too often mislead consumers into thinking they were buying comprehensive health coverage, Tanden said. Consumers would later be surprised to learn when they tried to use the insurance that their benefits were capped or certain coverages were not provided.

Tanden said Trump and other Republican-elected officials undermined the Affordable Care Act by allowing insurance companies to exploit loopholes and sell short-term plans that often leave consumers surprised when confronted by thousands of dollars in medical bills.

The ACA was signed into law in 2010 by President Barack Obama. Biden and his administration have spent this week marking the 14th anniversary of the landmark law’s enactment.

Short-term plans were expanded in 2018 during the Trump administration as a cheaper alternative to the Affordable Care Act’s costlier comprehensive insurance. Trump, who had promised to repeal and replace the law, has praised short-term plans as “much less expensive health care at a much lower price.”

In 2020, a divided federal appeals court upheld the Trump administration’s expansion of short-term health insurance plans.

The U.S. Court of Appeals for the District of Columbia Circuit said the Trump administration had the legal authority to increase the duration of the health plans from three to 12 months, with the option of renewing them for 36 months. The plans do not have to cover people with preexisting conditions or provide basic benefits like prescription drugs.

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