On March 28, the Departments of Health and Human Services, Labor, and the Treasury Department released final rules addressing short-term, limited-duration insurance (STLDI) and hospital indemnity plans. These final rules come from the agency’s amendments proposed on July 23, 2023.
These policy amendments aim to clarify the differences between STLDI and comprehensive health insurance for beneficiaries. Clarifying these differences would reduce the risk of a beneficiary utilizing an STLDI as a long-term coverage option, allowing them to recognize temporary coverage quicker and better consider their coverage based on their current health status and long-term health risks.
The Departments are only finalizing a few of the restrictions at the moment. However, it’s important for independent agents selling individual market STLDI health plans to know what changes are coming.
Short-Term Medical Insurance Changes
3-4 Month Restriction on STM Coverage Periods
The amended federal definition of an STLDI limits the initial contract term to no more than three months. An insurer may agree to extend or renew coverage for one additional month, making the maximum coverage period at most four months.
The previous rules defined STLDI contract terms of fewer than 12 months and a maximum total coverage period of up to 36 months, including renewals and extensions.
The updated STLDI definition in these rules aims to clarify its role as short-term coverage, distinguish it from comprehensive plans, and lessen financial and health risks for consumers using it as a long-term substitute.
New Definition for STLDI Renewals & Extensions
The amended definition of STLDI renewals or extensions includes STLDI plans sold by the same issuer, or any issuer that is a member of the same controlled group, to the same policyholder within a 12-month period.
This rule prevents the practice of policy “stacking” by either the same underwriter or any affiliated entity within the same “control group,” for the benefit of the same policyholder over a rolling 12-month period, starting from the effective date of the initial coverage.
When do these changes go into effect?
These federal law changes will take effect on September 1, 2024, impacting STLDI plans sold or issued afterward.
Hospital Indemnity Insurance Changes
Required Consumer Notice for Fixed Indemnity Expected Benefits Coverage
The amended consumer notice highlights the differences between fixed indemnity expected benefits coverage and comprehensive coverage. This final rule also ensures issuers display this consumer notice in marketing, application, enrollment, and re-enrollment materials in individual and group markets.
When do these changes go into effect?
These federal law changes affect new and existing coverage, starting from plan years beginning January 1, 2025.
Ultimately, these final rules seek to protect the best interests of beneficiaries by clarifying that STLDI coverage is only temporary and does not replace a marketplace health insurance plan. Knowing these changes is essential to ensure your clients choose the best insurance option for their health needs. Our team is here to answer any questions about these final rules and how they affect you and your business.
________________________________
Carolina Senior Marketing, your premier Medicare FMO in North Carolina, gives you access to the best ACA and STLDI carriers. Join our network of independent agents today! Call us at (919) 460-6073 or email info@carolinaseniormarketing.com to get started.
