The US Department of Health and Human Services (HHS), the Department of Labor, and the Treasury have teamed up to propose changes to increase transparency and reduce surprise costs for patients.

The agencies suggest distinguishing short-term, limited-duration insurance (STLDI) and fixed indemnity insurance from comprehensive coverage. The HHS described the first two types of insurance plans as ones that “sometimes include benefit limitations, and are sold by employing dubious marketing practices, that render such coverage as nothing more than junk”.

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The plans currently do not fall under any of the consumer protections of the Affordable Care Act (ACA), unknown to many consumers. Therefore, HHS highlights that, in their ignorance, consumers may choose plans that do not cover essentials such as prescription drugs, and pre-existing conditions or impose annual or lifetime dollar limits on services.

In a July 7 press release, the HHS explains that these plans require individuals to pay a pre-determined fixed amount for a health-related event, regardless of expenses incurred.

In a bid for increasing transparency, the department proposes an amendment to the federal definition of STLDI that shortens the initial contract period to a maximum of three months and a maximum coverage period of four months, considering any renewals or extensions. This change falls under President Biden’s “Bidenomics” agenda, along with the Inflation Reduction Act, to reduce healthcare costs and reduce surprise fees.

The agency simultaneously released a report estimating that almost 19 million seniors will save approximately $400 on annual prescription drug costs when the $2,000 out-of-pocket prescription drug spending cap in the Inflation Reduction Act (IRA) goes into effect in 2025.

The new Office of the Assistant Secretary for Planning and Evaluation (ASPE) report found that almost 1.9 million Medicare Part D enrollees are expected to save at least $1,000 in 2025 due to the changes. Altogether, ASPE predicted the IRA may reduce annual out-of-pocket spending by $7.4bn.

The HHS, the Consumer Financial Protection Bureau, and the US Department of the Treasury are requesting public comment “on the prevalence, nature, and impact of medical credit cards and other medical payment products on consumers and on the healthcare system”. They are also seeking comments on policies to tackle practices by financial companies and healthcare providers offering these products that cause individuals to pay excess costs and that increase medical debt. This comment period will end on September 11 2023.