Regulations Regarding Short-Term Limited-Duration Insurance, Excepted Benefits, and Lifetime/Annual Limits
By Danielle Capilla, Chief Compliance Officer at United Benefit Advisors
Recently, the U.S. Department of the Treasury, Department of Labor (DOL), and Department of Health and Human Services (HHS) (collectively the Departments) issued final regulations regarding the definition of short-term, limited-duration insurance, standards for travel insurance and supplemental health insurance coverage to be considered excepted benefits, and an amendment relating to the prohibition on lifetime and annual dollar limits.
Effective Date and Applicability Date
These final regulations are effective on December 30, 2016. These final regulations apply beginning on the first day of the first plan or policy year beginning on or after January 1, 2017.
Short-Term, Limited-Duration Insurance
Short-term, limited-duration insurance is a type of health insurance coverage designed to fill temporary gaps in coverage when an individual is transitioning from one plan or coverage to another plan or coverage. Although short-term, limited-duration insurance is not an excepted benefit, it is exempt from Public Health Service Act (PHS Act) requirements because it is not individual health insurance coverage. The PHS Act provides that the term ‘‘individual health insurance coverage’’ means health insurance coverage offered to individuals in the individual market, but does not include short-term, limited-duration insurance.
On June 10, 2016, the Departments proposed regulations to address the issue of short-term, limited-duration insurance being sold as a type of primary coverage.
The Departments have finalized the proposed regulations without change. The final regulations define short-term, limited-duration insurance so that the coverage must be less than three months in duration, including any period for which the policy may be renewed. The permitted coverage period takes into account extensions made by the policyholder ‘‘with or without the issuer’s consent.’’ A notice must be prominently displayed in the contract and in any application materials provided in connection with enrollment in such coverage with the following language:
THIS IS NOT QUALIFYING HEALTH COVERAGE (‘‘MINIMUM ESSENTIAL COVERAGE’’) THAT SATISFIES THE HEALTH COVERAGE REQUIREMENT OF THE AFFORDABLE CARE ACT. IF YOU DON’T HAVE MINIMUM ESSENTIAL COVERAGE, YOU MAY OWE AN ADDITIONAL PAYMENT WITH YOUR TAXES.
The revised definition of short-term, limited-duration insurance applies for policy years beginning on or after January 1, 2017.
Because state regulators may have approved short-term, limited-duration insurance products for sale in 2017 that met the definition in effect prior to January 1, 2017, HHS will not take enforcement action against an issuer with respect to the issuer’s sale of a short-term, limited-duration insurance product before April 1, 2017, on the ground that the coverage period is three months or more, provided that the coverage ends on or before December 31, 2017, and otherwise complies with the definition of short-term, limited-duration insurance in effect under the regulations. States may also elect not to take enforcement actions against issuers with respect to such coverage sold before April 1, 2017.
For information on final regulations regarding excepted benefits, specifically similar supplemental coverage and travel insurance—as well as information on the definition of essential health benefits for purposes of the prohibition on lifetime and annual limits, view UBA’s ACA Advisor, “Regulations Regarding Short-Term Limited-Duration Insurance, Excepted Benefits, and Lifetime/Annual Limits.”