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On March 28, the Departments of Labor (DOL), Health and Human Services’ (HHS’) Centers for Medicare and Medicaid Services (CMS), and Treasury released a final short-term limited-duration (STLD) health insurance rule. It retains the proposed rule’s new limits of three months duration, with a four-month renewal option for this kind of insurance.

The new final regulation also requires new disclosure rules—generally language making clear to prospective purchasers that STLD is not the full coverage that they would get from an ACA-compliant policy.

Fixed indemnity plans are also impacted by the new rule. The new regulation defers most of the proposed rule’s fixed indemnity proposals but modifies the four conditions that a fixed indemnity policy must comply with if the coverage is offered as a tax-free employer-paid benefit. The regulation’s preamble notes the agencies plan more guidance/changes on fixed indemnity health insurance in the future.

The STLD rules that were in effect prior to this regulation allowed for STLD coverage for up to a year, with renewal possible for up to three years. Under this rule, the coverage can be purchased only for three months, with an up to four-month renewal period.

STLD health insurance is not Affordable Care Act (ACA)-compliant insurance. Rather, it is designed to provide limited coverage for a short interim period. It may not offer the full panoply of minimum essential benefits required of ACA-compliant coverage, and it can be priced in a way that includes factors (e.g., age, health conditions, gender, geography) that ACA-compliant insurance cannot consider. It is usually used to bridge a gap between one employer’s full coverage and a new employer’s health insurance plan or for limited coverage during a period of unemployment.

A fixed indemnity plan (e.g., a cancer-only policy) generally pays a benefit when a triggering event (illness or injury) occurs. The benefit is not related to the cost of care for the triggering event. Rather it is a fixed payment amount (usually daily) that can be used to pay for non-health needs, such as, for example, rent or mortgage payments, during the period of coverage.

Prospects: Further guidance is expected on fixed indemnity coverage. And push-back from Congressional Republicans on the STLD rules has already begun. The issue is not going to go away, especially if the November elections change partisan control of the presidency, House and/or Senate.    

NAIFA Staff Contact: Michael Hedge – Senior Director – Government Relations, at mhedge@naifa.org.