How Are Short-term Health Insurance Plan Rules Changing?

The final ruling for Short-Term, Limited Duration Insurance (STLDI) will limit terms and renewability. STLDI is often used to bridge insurance gaps by offering limited medical coverage. These plans do not meet minimum coverage guidelines, so insurers can offer them at a lower price point and include medical underwriting as a prequalification to obtain the coverage. STLDI has been a game-changer for those who can’t afford high marketplace premiums and don’t need comprehensive coverage.

Changes to Short-term Health Insurance Coverage Lengths

Short-term plans are limited to initial contract terms of fewer than 12 months, but this will be lowered to no more than 3 months for all new policies and contracts sold or issued starting September 1st, 2024. However, contracts and policies already in place can still abide by current rules and their state’s regulations.

Unfortunately, these drastic changes will greatly impact consumers in states like Florida, where the initial contract term is set at a maximum of 364 days. Consumers rely on this medical coverage for nearly a year at a time because, for some, it’s all they can afford.

Changes to Back-to-Back Renewals

Presently, STLDI plan lengths (including renewals and extensions) can be up to 36 months, but as of September 1st, 2024, this will be limited to 4 months total. Although the name “Short-Term, Limited Duration Insurance” clearly indicates that it is not meant to be a long-term solution, the exorbitant prices of Marketplace coverage have pushed many to rely on STLDI as a longer-term solution because these people are also ineligible for Medicaid. Now, this same group of people will be forced to either pay those higher rates for basic healthcare or go without, further damaging the healthcare system for all.

Changes to Marketing and Disclosure Requirements

STLDI is under scrutiny largely due to misunderstandings about how the coverage works-whether that’s caused by agent misrepresentations, unclear language on policy documents, or customers simply not understanding their policy. To resolve this, the final rule requires clear-cut, easy-to-read language on all contracts, applications, policy documents, and marketing materials so that consumers can easily tell the difference between STLDI and comprehensive coverage. These notices must be prominent and included on renewals as well.

Changes to Short-term Health Insurance Sold Through Groups and Associations

The final rule also targets group trusts and associations since most STLDI is sold via these channels. Currently, these associations are taking advantage of loopholes by selling policies in states with less strict regulations to consumers in highly regulated states.

Now, these organizations must either meet the federal guidelines of STLDI or establish comprehensive health insurance for their clients. These rules aim to unblur the regulatory differences of STLDI across state lines.

Other Changes to Note

Here are some other changes mentioned in the final rules:

• Renewals/extensions by the same insurer/group will count as one to avoid stacking different policies consecutively as this may seem to the consumer that it is one policy instead of several.
• Prominent notices for indemnity insurance will be required in the group market to clarify the differences between indemnity and comprehensive coverage to deter customers from mistakenly purchasing indemnity plans instead of comprehensive health insurance.

All in All

These changes, which begin September 1st, 2024, aim to clarify the meaning and intent of Short-Term, Limited Duration Insurance. The final rules hope to give consumers better access to comprehensive coverage by reducing the terms and duration limits, and clarifying the language on policy documents will help avoid enrollee misinterpretation.