On August 1st, the Departments of Treasury, Labor and Health and Human Services released their final rule amending the definition of “short-term, limited duration insurance” (STLDI).

This is the latest move by the Administration to offer more affordable and flexible healthcare options to consumers. Notably, STLDI does not constitute “individual health insurance coverage” and is therefore not subject to the Affordable Care Act’s or other laws’ requirements for such coverage.

The final rule contains the following key elements:

  • Expands the maximum contractual duration of STLDI to less than 12 months after the original effective date of the contract (up from less than 3 months under Obama Administration regulations);
  • Imposes an overall duration limit, including account renewals and extensions, of 36 months in total; and
  • In addition to any disclosures mandated under State law, requires prominent disclosure in STLDI contracts that:
    • the coverage is not required to comply with the ACA’s market requirements or other federal laws governing health insurance;
    • consumers should carefully review the contract for exclusions and limitations, including those related to preexisting conditions and covered benefits;
    • the coverage may be subject to lifetime and/or annual dollar limits on benefits;
    • if coverage under the contract lapses or the consumer loses eligibility, s/he may have to wait until an open enrollment period to get other coverage; and
    • for coverage starting before January 1, 2019 – acknowledgement that the coverage is not Minimum Essential Coverage (MEC) and, for any month in 2018 an individual is not covered by MEC, s/he may face an individual mandate tax penalty.

The 36-month limitation on total duration of STLDI was not in the agencies’ proposed rule. Apparently concerned about a possible litigation challenge, the agencies have included a provision in the final rule stating that if a court invalidates the 36-month limit, the remainder of the rule will stay in effect.

The new definition will become applicable 60 days after the final rule is published in the Federal Register.

Please contact Joel Wood at joel.wood@ciab.com, Joel Kopperud at joel.kopperud@ciab.com or Blaire Bartlett at blaire.bartlett@ciab.com with any questions.