On March 28, the U.S. Departments of Health and Human Services, Labor and the Treasury collectively issued final rules with respect to short-term and limited duration insurance (STLDI) plans in an effort to reduce healthcare costs by protecting consumers from purchasing such “junk” health plans that may provide little to no coverage in many scenarios. A Fact Sheet on the final rules is available on the Centers for Medicare & Medicaid Services website.

STLDI plans are typically intended to fill temporary gaps in healthcare coverage. However, these plans are not subject to the consumer protections that were imposed by the Affordable Care Act, such as guaranteed coverage for consumers with pre-existing conditions and non-discrimination based on health status, age or gender. As a result, STLDI plans have all too often been deceptively marketed and misused.

Starting September 1, 2024, the final rules will limit the permissible duration of STLDI plans to no more than three months for the initial term and a maximum of four months of coverage after taking into account any extensions or renewals. This is a significant reduction from the three-year maximum duration that previously applied to these plans.

The new rules also require insurance companies to provide a clear and easy-to-understand notice to consumers with marketing, enrollment and re-enrollment information to help consumers make informed decisions when purchasing coverage under an STLDI plan. The goal is to ensure that consumers do not inadvertently purchase STLDI plans as a substitute for long-term comprehensive coverage.