The Departments of Treasury, Labor, and Health and Human Services have issued a final rule that expands the availability of short-term, limited duration insurance policies that are exempt from Affordable Care Act (ACA) qualified health plan standards (e.g., the requirement to provide essential health benefits, prohibition on preexisting condition exclusions, lifetime and annual dollar limits, guaranteed availability and guaranteed renewability). The final rule extends the maximum duration of such “short-term” coverage from less than three months to a maximum initial contract term of less than 12 months, and – in a change from the proposed rule — a maximum duration (including the initial contract term and renewals and extensions) of up to 36 months. States may adopt a definition with a shorter maximum initial contract term and/or a shorter maximum duration of a policy. The final rule also revises the requirements for consumer notices that must appear in the contract and any application materials provided in connection with enrollment in these short-term, limited-duration insurance policies.
Based on an updated analysis, the Administration estimates that 2019 enrollment in short-term, limited-duration insurance will increase by 600,000 (including 100,000 previously-uninsured consumers), while Exchange enrollment is expected to decrease by 200,000 and off-exchange plan enrollment is expected to decrease by 300,000. By 2028, the Administration projects that enrollment in individual market plans will decrease by 1.3 million, while enrollment in short-term, limited-duration insurance will increase by 1.4 million, representing a 0.1 million increase in the total number of people with some type of coverage. The Administration also discusses benefits and costs of the rule, including comments it received regarding the potential effects on premiums, the individual market risk pool, out-of-pocket spending, and access to care, among other impacts.
The final rule is effective October 2, 2018 and applies to insurance policies sold on or after October 2, 2018.