Final Rule Released on Short-Term Limited Duration Insurance Plans

Advocate Masthead

ACP applauds the final rule, which limits initial contract terms to no more than three months and limits maximum coverage period to no more than four months

April 19, 2024 (ACP) -- The Biden administration has finalized regulations for short-term limited-duration insurance plans that will help prevent patients from being underinsured and exposed to financial risk.

"Short-term limited duration and other junk plans are not required to abide by the ACA's patient protections, potentially exposing patients to high out-of-pocket costs," said Dr. Omar T. Atiq, president of the American College of Physicians. "The final rule ensures that such plans do what they are intended to do -- fill in temporary gaps in coverage, not serve as a replacement for primary, comprehensive coverage."

The plans are intended to fill gaps in insurance coverage, such as when people are in between jobs. "Generally, they're catastrophic coverage, not comprehensive coverage, so they aren't subject to a range of federal consumer protections and regulations," said Ryan Crowley, ACP senior associate for health policy. "They aren't required to cover things like prescription drugs or behavioral health services, and they can exclude coverage for preexisting conditions."

In addition, the policies are not subject to prohibitions on limiting annual or lifetime benefits. Crowley noted that the premiums for these plans are often less expensive than unsubsidized marketplace-based individual coverage. "A typical consumer might be someone who wants some level of coverage for a low price but doesn't qualify for subsidized coverage or can't afford it," he said. "They may also appeal to people who aren't able to access marketplace-based coverage, like undocumented immigrants."

Under the new regulations, the plans are limited to initial contract terms of no more than three months and a maximum coverage period of no more than four months, including renewals or extensions. Previously, these limits were 12 months and 36 months, respectively.

The new rules also prevent insurers from sequentially selling separate policies to the same policyholders. According to the Centers for Medicare & Medicaid Services, this practice -- known as "stacking" -- allows insurers to evade duration limits and imperils consumers who mistakenly buy these policies as an alternative to comprehensive coverage.

In addition, the new regulations "include some requirements on notice standards so people will understand what they're buying when they're shopping for coverage," Crowley explained.

The new rules go into effect for policies sold on Sept. 1, 2024, or later. For policies sold earlier, the earlier limits will remain in effect, although they are subject to applicable state laws.

"Physicians may want to refer patients to a health insurance expert who will give them objective information about their coverage options," Crowley said. "Navigators and certified application counselors can answer questions about whether a person is eligible for premium tax credits to buy marketplace-based coverage and what their options are if they aren't eligible for subsidies. The website can help patients locate agents, brokers and assisters who can help. Not to say all insurance brokers are unscrupulous, but there have been several instances of brokers misleading people about what these plans cover."

Health Day Logo

Back to the April 19, 2024 issue of ACP Advocate