On August 1, 2018, the Department of the Treasury, the Department of Labor, and the Department of Health and Human Services (“the Departments”) released a final rule amending the definition of short-term, limited duration (STLD) insurance. Notably, the final rule lengthens the maximum period of STLD coverage, allowing policy durations of up to 12 months, and options to renew policies for up to 36 months. This change is a departure from the current 2016 rule that strictly limits STLD coverage to less than three months.
The final rule is set be published in the Federal Register on August 3, 2018, with the rule taking effect on October 4, 2018.
This final rule is in response to the President’s October 12, 2017, executive order requiring that the Departments issue joint regulations or guidance to expand the availability of STLD plans.
A stated primary goal of this rule change is to offer an affordable coverage option for individuals and families that do not qualify for Affordable Care Act (ACA) Exchange subsidies, have faced steep premium increases in recent years, or are in need of a coverage option outside of open enrollment. The final rule also notes that states may be able to redirect existing federal subsidies to purchasers of short-term, limited-duration insurance under waivers authorized by section 1332 of the ACA.
As stipulated in the ACA and maintained in the final rule, STLD plans are not subject to ACA coverage requirements, including actuarial value standards and essential health benefits. Additionally, the plans are not subject to the prohibitions on preexisting condition exclusions or lifetime and annual dollar limits. STLD plans are also not subject to requirements regarding guaranteed availability and guaranteed renewability. Nevertheless, the final rule does clarify that applicable state insurance requirements still apply.
This final rule, when taken in conjunction with the 2017 tax reform package that zero out individual mandate penalties for plans starting in 2019, offers consumers in the individual insurance market a new option for coverage without having to select a plan that meets the ACA’s minimum essential coverage standards, which had previously been requisite for taxpayers to avoid the penalty.
The Departments estimate that in 2019, STLD insurance enrollment will increase by 600,000, with Exchange enrollment decreasing by 200,000, and off-Exchange plan enrollment decreasing by 300,000. An additional 100,000 previously uninsured individuals are projected to acquire STLD coverage.
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