The departments of Health and Human Services (HHS), Labor, and the Treasury issued a final rule on short-term, limited-duration insurance (STLDI) plans and fixed indemnity excepted benefits coverage. STLDI provides coverage for short periods when an individual is transitioning between two types of coverage and does not afford the same protections that longer-term health insurance receives under federal law. Indemnity and fixed indemnity insurance is a cash benefit that is provided by plans to an individual to cover costs related to a specific health-related event. The AAMC submitted August 2023 comments in support of the provisions of the proposed rule, citing the significant coverage limitations imposed by STLDI and the disproportionate impact the plans can have on underserved communities [refer to Washington Highlights, Aug. 4, 2023].
In the final rule, the departments revised the definition of STLDI to limit the length of the initial contract term to no more than three months and the maximum coverage period to no more than four months, taking into account any renewals or extensions. The previous definition of STLDI was coverage with an initial contract term of fewer than 12 months and a maximum total coverage period of up to 36 months, including renewals and extensions. By narrowing the definition of what qualifies as STLDI, the rule will result in federal individual market consumer protections for a broader range of insurance plans. The final rule also revises the federal notice standard for STLDI and fixed indemnity benefit coverage so consumers can more clearly distinguish between comprehensive coverage and short-term coverage. Citing the need for additional time to study concerns raised by commenters, the departments did not finalize proposals that would have required employer-provided fixed indemnity health insurance plans (and other similar plans) to be included in a taxpayer’s income if the amounts are paid without regard to the actual amount of any incurred medical expenses.
The new definition of STLDI and the notice requirements apply for coverage periods beginning on or after Sept. 1.