QUESTION: Some of our employees are considering purchasing short-term, limited-duration health insurance policies instead of enrolling in our employer-sponsored health plan. Will these employees have special enrollment rights in our group health plan if they lose eligibility for short-term, limited-duration coverage?
ANSWER: It is likely that employees who lose eligibility for short-term, limited-duration health insurance will be entitled to special enrollment rights under your company’s group health plan—assuming they are otherwise eligible to enroll in the plan at that time. As background, eligible employees (and their eligible dependents) are entitled to HIPAA special enrollment rights under your company’s plan if they lose eligibility for health insurance coverage (or if they lose eligibility for coverage under another group health plan). Health insurance coverage means benefits consisting of medical care under any HMO contract or hospital or medical service policy, certificate, or contract offered by a health insurer. Health insurance coverage includes group health insurance coverage, individual health insurance coverage, and short-term, limited-duration insurance.
Agency regulations require short-term, limited-duration health insurance to have an initial coverage period of fewer than 12 months and allow renewals and extensions for up to a total of 36 months (see our Checkpoint article). Although short-term, limited-duration policies are individual policies, they are not subject to individual-market mandates under the Affordable Care Act (ACA) and may be a less expensive (though less comprehensive) coverage option than employer-sponsored coverage for some employees. This may explain your employees’ interest in the coverage.
The preamble to the regulations indicates that loss of eligibility for short-term, limited-duration coverage gives rise to a HIPAA special enrollment right with respect to group health plan coverage (regardless of whether the group health plan coverage is insured or self-insured). This is because the regulations treat short-term, limited-duration insurance as “health insurance coverage,” the loss of which will trigger special enrollment rights, even though it is not “individual health insurance coverage” subject to the ACA’s insurance mandates.
For purposes of HIPAA’s special enrollment rules, loss of eligibility does not include loss of coverage resulting from the failure to pay timely premiums or voluntarily dropping coverage. Thus, special enrollment rights under your plan will not be triggered, for example, solely because an employee becomes dissatisfied with the short-term, limited-duration coverage and decides to drop the coverage.
For more information, see EBIA’s HIPAA Portability, Privacy & Security manual at Section X.B (“Special Enrollment Rights: Individuals Who Lose Other Coverage”). See also EBIA’s Cafeteria Plans manual at Section XIV.K (“HIPAA Special Enrollment Rights”) and EBIA’s Health Care Reform manual at Section V.C.4.d (“Short-Term, Limited-Duration Insurance Is Generally Not Subject to PHSA Mandates”).
Contributing Editors: EBIA Staff.