HHS, DOL and IRS (the “Agencies”) have jointly issued a proposed rule that expands the availability of short-term, limited-duration health insurance. The proposed rule would allow consumers to buy individual health insurance plans that provide coverage for any period of less than 12 months, rather than the current maximum period of less than three months.
Background. Short-term, limited-duration insurance is designed to provide temporary coverage for individuals transitioning between health insurance policies. Short-term insurance plans often provide some protection to those who enroll by paying a percentage of hospital and doctor bills after the policyholder meets the specified deductible.
In October 2016, the Agencies issued a final rule that restricts the maximum term of a short-term limited-duration insurance policy to less than three months. In response, certain stakeholders expressed concerns that this limit could cause harm to some consumers, limit consumer options, and ultimately have little positive impact on insurance risk pools.
Short-term, limited-duration health insurance coverage is exempt from the definition of individual health insurance coverage under the ACA. Therefore, it is not subject to the ACA’s individual market requirements that apply to individual health insurance plans (e.g., the mandate to cover Essential Health Benefits, the prohibition on imposing pre-existing condition exclusions, etc.).
Proposed Rule. The following are highlights from the proposed rule:
- Compliance with the ACA’s Individual Mandate. The proposed rule confirms that short-term, limited-duration health insurance coverage is not considered to provide Minimum Essential Coverage under the ACA. Therefore, a consumer whose health insurance coverage during the 2018 tax year is through a short-term policy may be subject to the ACA’s Individual Mandate Penalty (which requires nearly all Americans to be insured or pay a penalty). However, this will not be an issue after 2018 because Congress has effectively eliminated the individual mandate starting in 2019 as part of its tax overhaul bill.
- Extension of the Maximum Permissible Coverage Period. The proposed rule amends the definition of short-term, limited-duration insurance such that insurers could begin to offer any coverage period of less than 12 months, including any extensions that may be elected by a policyholder. As with the current regulations, this insurance may not be renewed after the maximum period of coverage.
- Notice requirements. The proposed rule revises the notice that must be provided with enrollment materials for short-term, limited-duration insurance. Specifically, the proposed rule requires the use of one of two revised notice versions depending on whether the coverage start date is before January 1, 2019.
NOTE: This is because starting in 2019, when the ACA’s individual mandate penalty is reduced to zero, certain language contained in the first version of the notice will no longer apply.
Both versions of the notice are intended to notify consumers that short-term, limited-duration policies are not required to comply with certain federal health insurance mandates, principally those contained in the ACA.
The proposed rule is available at: https://www.gpo.gov/fdsys/pkg/FR-2018-02-21/pdf/2018-03208.pdf