Short-Term, Limited-Duration Insurance, 26 CFR Part 54, 29 CFR Part 2590, 45 CFR Parts 144, 146, and 148, 83 Fed. Reg. __ (Aug. 3, 2018); HHS News Release: Trump Administration Delivers on Promise of More Affordable Health Insurance Options
The DOL, HHS, and IRS have jointly finalized regulations that extend the permissible duration of short-term, limited-duration health insurance—following President Trump’s executive order directing the agencies to consider regulations or guidance that would allow such insurance to cover longer periods and to be renewed by the consumer (see our Checkpoint article). The regulations, which finalize previously proposed rules (see our Checkpoint article) with some modifications, will be effective 60 days after publication in the Federal Register. Here are highlights:
- Lengthening of Coverage Period With Renewals and Extensions. In finalizing the regulations, the agencies have interpreted “short term” to mean an initial coverage period of fewer than 12 months and implemented the “limited duration” requirement by allowing renewals or extensions for up to a total of 36 months. The regulations do not preclude the purchase of separate policies that run consecutively, so long as each individual policy is separate and can last no longer than 36 months. States may adopt a definition with a shorter maximum initial term or shorter maximum duration (including renewals and extensions), but they may not lengthen these periods. The preamble explains that short-term, limited-duration coverage is similar to COBRA in that both serve as temporary coverage for individuals transitioning between other types of coverage, and that the agencies looked to COBRA (which permits a maximum of 36 months of continuation coverage) for the meaning of limited duration. Recognizing that the 36-month maximum duration standard may be challenged in court, the agencies have added a severability clause to ensure that the remaining standards in the regulations would still be effective. [EBIA Comment: The interpretation of the limited-duration requirement to mean up to 36 months is a new feature added in the final regulations. This takes the potential duration well beyond the maximum coverage period of 12 months that applied before the October 2016 regulations, which reduced the maximum coverage duration to fewer than three months, including any possible extensions (see our Checkpoint article).]
- Notice Changes. Enrollment materials for short-term, limited-duration insurance must include one of two versions of the required notice, depending on whether the coverage start date is before January 1, 2019. (There are two versions because certain language relating to maintaining minimum essential coverage to avoid the individual mandate penalty under the Affordable Care Act (ACA) will no longer apply starting in 2019, when the individual mandate penalty is reduced to zero—see our Checkpoint article.) The notice is intended to warn consumers that short-term, limited-duration policies are not required to comply with certain federal health insurance mandates, principally those contained in the ACA. In the final regulations, the notice has been revised to add specific language making consumers aware of potential exclusions or limitations of preexisting conditions or of certain benefits (e.g., hospitalization, emergency services, maternity care, preventive care, prescription drugs, and mental health and substance use disorder services). New language also indicates that the policy might have lifetime and annual dollar limits on health benefits. States have flexibility to require additional disclosures.
EBIA Comment: The preamble acknowledges that making short-term, limited-duration policies more available and for longer periods than currently permitted could have an impact on the risk pools for individual health insurance coverage—thus raising premiums for that coverage. However, the agencies have determined that more affordable coverage options “substantially outweigh the estimated impact on individual health insurance premiums.” The preamble also notes that although premium tax credits (available to qualifying individuals who enroll in Exchange coverage) are not available for the purchase of short-term, limited-duration insurance, states may be able to provide subsidies to purchasers of such coverage with funds provided under ACA innovation waivers if they satisfy the applicable waiver requirements (see our Checkpoint article). For more information, see EBIA’s Health Care Reform manual at Section V.C (“What Is a Group Health Plan?”) and EBIA’s HIPAA Portability, Privacy & Security manual at Section VI.F (“Excepted Benefits: Certain Health FSAs, Dental, Vision, and Others”).
Contributing Editors: EBIA Staff.