The US government has announced new regulations to safeguard consumers purchasing short-term health insurance plans, which have been criticised for being inadequate.  

These plans, also called junk insurance, are often used as a stop-gap by over one million Americans during periods such as job transitions, according to Reuters.   

Under the new rules, “short-term” health insurance plans are now restricted to a three-month term, with the possibility of a four-month extension, down from the previous limit of up to three years. 

Insurance plans will now be required to provide a clear disclaimer to consumers, detailing the extent of coverage and associated costs.  

Neera Tanden, the domestic policy adviser to President Joe Biden, stated that these short-term plans have misled consumers into believing they were purchasing comprehensive health insurance.  

These plans often exclude coverage for preexisting conditions and essential benefits such as prescription drugs, and have low caps on benefits. 

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In 2016,  

the Obama administration set a three-month limit on short-term insurance plans to encourage enrolment in year-round plans.  

However, the Trump administration’s 2018 regulations allowed individuals to maintain these plans for twelve months and renew them for up to three years, positioning them as a more affordable alternative to the comprehensive insurance provided under the Affordable Care Act.  

In a statement, the White House said:  “The Affordable Care Act has helped tens of millions of Americans access high-quality, affordable health insurance and protects Americans from being discriminated against because of pre-existing conditions.   

“But actions by Republican elected officials, including the previous administration, undermined the promise of the Affordable Care Act, allowing insurance companies to take advantage of loopholes in the law and sell “junk insurance” plans that evade its critical consumer protections, like denying care based on pre-existing conditions.”