CMS chops short-term, limited duration plan length to 4 months

The Biden administration has reduced the timeframe of short-term limited duration insurance plans, also known as “STLDI” or “junk” plans, in an effort to curb underinsurance, CMS announced.

“HHS is cracking down on junk insurance plans to help consumers make informed choices and avoid mistakenly paying for a plan that does not provide them the coverage or protection they expect,” said Department of Health and Human Services (HHS) Secretary Xavier Becerra.

The new final rule—known as the Short-Term, Limited-Duration Insurance and Independent, Noncoordinated Excepted Benefits Coverage, or “Junk Insurance”, Final Rules—places a four-month limitation on STLDI plan coverage spans. This is a significant decrease from the previous three-year timeframe instituted by the Trump administration and approved by an appeals court.

STLDI providers will no longer be able to engage in “stacking” plans. If a consumer purchases an STLDI plan from the same issuer or an issuer within the same controlled group within a year, it is considered a renewal or extension.

In addition to shortening the plans’ timeframe, the rule requires STLD plans and fixed indemnity policies to be more transparent in consumer-facing materials for marketing, application, enrollment, and reenrollment.

“By increasing consumer understanding of short-term, limited-duration insurance and fixed indemnity excepted benefits coverage and making short-term plans truly short term, people will be more informed about the risks associated with these types of coverage and their options for comprehensive coverage,” CMS Administrator Chiquita Brooks-LaSure explained in the press release.

Most of these changes take effect on September 1, 2024, with the exception of any changes related to fixed indemnity excepted benefits coverage on the group and individual health insurance marketplaces. These changes take effect on January 1, 2025.

The Biden administration originally proposed this policy in July 2023. The rule regards one of many major healthcare policy differences between the Trump and Biden administrations: the appropriate use of STLDI plans.