The Departments of Labor (DOL) and Health and Human Services (HHS), as well as the Internal Revenue Service (IRS), have jointly issued final regulations that extend the permissible duration of short-term, limited-duration health insurance. Previously limited to less than three months, short-term, limited-duration insurance is a type of health insurance coverage which is primarily designed to fill gaps in coverage that may occur when an individual is transitioning from one plan or coverage to another plan or coverage, as may be the case with a person who is between jobs. This type of coverage is exempt from the definition of individual health insurance coverage under the Patient Protection and Affordable Care Act (ACA) and is therefore not subject to the ACA provisions that apply to the individual market. These plans are typically more affordable than plans found in the Marketplace.
Consumers will now have the ability to purchase short-term, limited-duration insurance policies that:
- Are less than 12 months;
- Contain important language to help them understand the coverage they are getting; and
- May be renewed for up to 36 months.
Note that states have the ability to adopt a shorter maximum initial term or shorter maximum duration (including renewals and extensions), however they may not extend these periods.
The final rule also requires that issuers of short-term, limited-duration insurance prominently display in consumer materials one of two versions of a consumer notice explaining the policy that the consumers are purchasing. The purpose of the notice is to educate consumers that the short-term, limited-duration polices are not required to comply with certain federal health insurance mandates, primarily and namely those mandates contained in the ACA. For example, these plans can impose pre-existing condition exclusions, are not required to automatically renew the plan at contract term, and might have lifetime and annual dollar limits on health benefits. In addition, they may not cover services such as prescription drug coverage, preventive care, hospitalization, maternity care, and mental health and substance abuse disorder services. States also have the ability to require additional disclosures.
This final rule is effective and applicable 60 days after publication in the Federal Register.