The Departments of Health and Human Services, Labor and the Treasury recently issued new rules regarding Short-Term, Limited-Duration Insurance (STLDI) to prevent insurance companies from misleading consumers.
STLDI plans are not subject to the Affordable Care Act’s (ACA’s) critical consumer protections, including guaranteeing coverage for people with pre-existing conditions and prohibiting discrimination based on health status, age, or gender. These plans are a type of health insurance that is typically designed to fill temporary gaps in coverage when an individual is transitioning from one source of coverage to another.
Unscrupulous health insurance carriers have misled consumers in the past regarding these plans, getting them to buy into plans that discriminate based on pre-existing conditions and that provide little or no coverage when consumers need it the most. Similarly, although labeled as short-term policies, some were designed to stay in effect for as much as three years.
The actions taken by the government agencies will stop misleading marketing and limits these “short-term” plans to no more than four months. According to a press release from CMS, the “actions will protect families from receiving thousands of dollars in health care bills.”
The final rule, which takes effect September 1, 2024, requires health insurance companies to be clear and up-front about what consumers are buying. Short-term plans, as well as “fixed indemnity” insurance policies that provide a fixed, cash payment for a health care event, will have to include a clear, easy-to-understand consumer notice on marketing, application, enrollment, and reenrollment materials, so that consumers can make informed coverage purchasing decisions.
This ruling is strictly about STLDI, the length of these plans and to prevent stacking of these plans. Short-Term plans were designed to be exactly that…used for a short period of time, such as filling in gaps between coverage. For example, if a person leaves a job for another, but that new position has a waiting period before benefits kick in, STLDI can be used in case a major medical event occurs.
Likewise, because most sales of STLDI are done through group trusts or associations, the ruling clarifies that even though coverage is sold through these group trusts, these plans are not group coverage for purposes of federal law and must meet the federal definition of STLDI.
Conversely, this ruling has no impact on indemnity plans, such as cancer, accident, travel or any other similarly designed plan.
If you have questions about this ruling, please contact your Sales Relationship Manager directly or call LeClair at 651.739.3010.
