HHS Proposed Rule Aims to Distinguish STLDI from Comprehensive Plans

The Department of Health and Human Services (HHS), the Department of Labor, and the Department of the Treasury have released a notice of proposed rulemaking that applies to short-term, limited-duration health insurance (STLDI) plans.

“The proposed rule, among other policies, would amend the federal definition of STLDI to ensure these ‘short-term’ plans are truly short-term and used to fill temporary gaps in comprehensive coverage,” the press release explained.

“It would also require STLDI and fixed indemnity excepted benefits coverage to make clearer to consumers the differences between these products and comprehensive coverage, including what is covered and how much is covered.”

STLDI plans are excluded from certain comprehensive coverage requirements and consumer protections on the individual health insurance marketplace because it is not considered an individual health insurance coverage option. As a result, these plans function differently than traditional health plans. They could expose enrollees to higher costs, but consumers may not understand the risks.

Fixed indemnity is a form of coverage exempt from the Affordable Care Act and provides coverage per period or per health event. As with STLDI policies, consumers may struggle to distinguish this type of coverage from traditional health plans.

The proposed rule aimed to help consumers differentiate between policies with less comprehensive coverage and traditional health plans required to cover certain benefits.

HHS proposed shortening the length of time an individual can enroll in an STLDI plan to differentiate between these and traditional health plans. Currently, consumers can enroll in STLDI plans for up to three years. Additionally, under some issuers, they can switch to another STLDI plan under the same policyholder to prolong their enrollment.

By limiting the maximum enrollment length to four months and eliminating issuers’ ability to offer multiple STLDI policies, policymakers suggested that consumers would more readily recognize the plans as temporary bridges between short-term coverage gaps.

To differentiate fixed indemnity plans from traditional coverage, the rule proposed returning to 2014 policies around eliminating per-service payments in the individual health insurance marketplace. Under the proposed rule, fixed indemnity plans could not pay benefits on a per-service basis.

Additionally, the rule would reinforce that fixed indemnity is intended to supplement coverage, not replace comprehensive plans.

However, the Departments recognized that these efforts may be insufficient and requested feedback from stakeholders on effective ways to reduce consumers’ confusion about STLDI plans.

The Departments also addressed certain activities among issuers. Issuers cannot offer STLDI plans as group health plans through trusts or associations to avoid state regulation. These plans also may not be marketed to employers as employer-sponsored health plans.

Before the proposed rule was released, the Association for Community Affiliated Plans (ACAP) commented on the harm that STLDI plans can cause and the need for further regulation from HHS in a statement emailed to HealthPayerIntelligence.

“Short-term plans were created to fill in brief gaps in coverage for workers as they moved between jobs,” Margaret A. Murray, chief executive officer of ACAP, said in the statement. “They were never designed to work as comprehensive coverage—as the last few years have proven. We have every expectation that that the Administration will put an end to the practice of junk plans masquerading as actual health insurance and enhance needed consumer protections.”