American Experiment urges Biden to withdraw proposed ban on affordable health coverage options

Yesterday American Experiment submitted comments urging the Biden administration to withdraw a proposed rule which would effectively ban certain types of insurance coverage. Not only are the proposals bad policy, but every major proposal in the rule would color outside the lines of federal law to achieve policy goals that the Biden administration cannot get passed through Congress.


The main proposals aim to undermine access to two types of health insurance coverage—short-term, limited duration insurance (STLDI) and fixed indemnity excepted benefit insurance. STLDI provides major medical coverage to people who need temporary insurance coverage, such as people between jobs or recent graduates. Fixed indemnity excepted benefit insurance provides supplemental fixed cash benefits to people who experience a medical event to help offset the financial burden, including medical costs that their comprehensive major medical coverage might not cover.

STLDI and fixed indemnity coverage have been available on the market for decades. STLDI has long been available for contract terms up to 12 months. Fixed indemnity coverage generally provides a fixed cash payment triggered by a medical event. These event-based payments could be based on a period of time (for example, $100 per day in the hospital) or per service (for example, $100 per doctor visit).

People highly value STLDI and fixed indemnity coverage

Both types of insurance are highly valued by people in transition or looking to supplement their current health coverage. For people losing a job, coverage from their former employer under COBRA can be very expensive. ACA-compliant individual market coverage can also be prohibitively expensive to anyone looking for coverage who does not qualify for government subsidies or have access to employer-sponsored coverage. Fixed indemnity can help fill cost sharing for people with high deductibles and help cover non-medical expenses like childcare, lodging, or home upkeep during an illness.

Biden rules effectively ban coverage options

The Biden administration has proposed several rules which will effectively ban key coverage options for both STLDI and fixed indemnity coverage. The rules would reduce the contract term for STLDI to 3 months up to a maximum of 4 months with renewal. Currently, STLDI can be offered for an initial term of less than 12 months and renewed for up to 36 months, which reflects the maximum amount of time people can renew transitional COBRA coverage. As we explain in comments to the rule, “regulations can become so onerous that they effectively ban the activity they regulate.” In the case, the Biden administration must know limiting contract terms to a maximum of 4 months will effectively shut down the market for STLDI in many states. The fact is, STLDI stopped being available in over 60 percent of states with similar requirements as the rule proposes.

For fixed indemnity coverage, the Biden administration proposes to ban benefits paid on a per-service basis. Thus, a person could not receive a cash payment per surgery to supplement the high-cost sharing under their major medical insurance coverage or to help fund lodging for family members to be by their side in their time of need. Instead, benefits could only be paid on a per-period basis. Moreover, the rule proposes to remove the tax exclusion for benefits paid from fixed indemnity plans under certain circumstances. These changes only serve to make the coverage less attractive.

The push toward government-controlled health care

The passage of the Affordable Care Act (ACA) in 2010 ushered in a new era of federal control over health insurance coverage, but it still left states as the primary regulators of insurance. A federal statute, the McCarran Ferguson Act, dating back to 1945 still puts states in the lead regulator role. In this role, the federal government has long deferred to states to regulate STLDI and fixed indemnity coverage. This policy recognizes that states are in a far better position to understand and adapt to changing local market conditions to protect consumers.

But with the expansion of federal control over health insurance under the ACA, there’s been a push to centralize more and more control over people’s health care choices into the hands of the federal government. Much of this push goes against federal statutes and policies which aim to preserve states as the primary regulators of insurance.

The proposed rules on STLDI and fixed indemnity coverage would clearly march America closer to a government-controlled health care system by eliminating private options. Indeed, the Biden administration openly justifies the proposed rule as a way to “encourage” people to enroll in the federal government’s preferred health coverage.

Unfortunately, this means people will lose access to affordable coverage and many will choose to go uninsured. The proposed rule, to its credit, openly admits this outcome. The fact is, ACA-compliant coverage is entirely unaffordable for people who don’t qualify for subsidies in certain areas of the country. In Hannibal, Missouri, the lowest-cost silver plan—the middle tier plan—on costs $17,668 annually ($1,472 per month) for a 60-year old. Clearly, people in Hannibal and elsewhere need more affordable options.

American Experiment’s comments focus largely on how the proposed rules impermissibly upend decades-old applications of federal law. You can read the full comments here.