Insights

Proposed Regulations Would Expand Availability of Short-Term, Limited-Duration Insurance


On Feb. 20, 2018, the DOL, HHS and Department of the Treasury (the Departments) issued a proposed rule to change the maximum duration of short-term, limited-duration coverage to less than 12 months (the current maximum duration is less than three months). The issuance of this proposed rule was a direct result of an executive order issued by President Trump in October 2017, which sought an extension of the short-term, limited-duration coverage allowed.

As background, short-term, limited-duration insurance is a type of coverage intended to fill temporary gaps in coverage when an individual is transitioning from one plan or coverage to another form of coverage. This type of coverage is exempt from the definition of "individual health insurance coverage" under the ACA and is, therefore, not subject to ACA provisions that apply to individual health insurance plans — including the requirement to provide coverage for essential health benefits, the prohibition on annual and lifetime dollar limits and prohibition on pre-existing condition exclusions. As a result, short-term, limited-duration insurance plans generally cost less than ACA-compliant plans.

In, 2016, the Departments published a final rule that restricted short-term, limited-duration insurance to less than three months (including any renewal periods), but key stakeholders, including state regulators, expressed concerns that the three-month limit could cause harm to some consumers, limit consumer options and have little positive impact on the risk pools in the long run. The new proposed rules address these concerns by reverting to an earlier definition of such insurance that permits this coverage up to 12 months.

In addition to extending the duration of coverage, the proposed rule also requires specific language to appear in the contract (and in any application materials) to help consumers understand the short-term, limited-duration coverage they're purchasing. There are two permissible versions of the notice, but both are intended to clearly communicate that the short-term, limited-duration coverage isn't required to comply with the federal requirements for health insurance, that the expiration of the coverage or loss of eligibility may require waiting until an open enrollment period and the coverage is not "minimum essential coverage" (which means the individual could later be exposed to a tax liability for failure to obtain MEC).

CMS is accepting comments on the proposed rule for 60 days until April 23, 2018.

Short-Term, Limited-Duration Insurance, Proposed Rule »