3-month limit on short-term insurance finalized as ACA enrollment begins

Just ahead of the fourth open enrollment period for the Affordable Care Act (ACA) insurance marketplace, HHS finalized a rule aimed at improving the risk pool on the exchanges and keeping consumers away from plans that don’t comply with the ACA.

Under the rule, short-term insurance plans would be limited to three months instead of 12 and wouldn’t be able to be renewed.

“In some instances, individuals are purchasing this coverage as their primary form of health coverage and, contrary to the intent of the 12-month coverage limitation in the current definition of short-term, limited-duration insurance, some issuers are providing renewals of the coverage that extend the duration beyond 12 months,” the rule said. “Because short-term, limited-duration insurance is exempt from certain consumer protections, the Departments are concerned that these policies may have significant limitations, such as lifetime and annual dollar limits on essential health benefits and pre-existing condition exclusions, and therefore may not provide meaningful health coverage.”

These plans may also exclude customers based on preexisting conditions, a key protection of the ACA. Those restrictions, and the threat of a tax penalty for not having ACA-compliant insurance, hasn’t stopped hundreds of thousands of people from purchasing these plans.

The new regulation also requires insurers to inform customers when they sign up for these limited-benefit coverage that it doesn’t meet the ACA’s standards.

HHS isn’t making any changes from its proposed rule released in June. It rejected several suggested modifications, like extending the limit to four months or allowing people who qualify for a special enrollment period to buy these kinds of plans instead.

The rule goes into effect Jan. 1, 2017, but HHS said it won’t enforce the rule on plans sold before April 1, as insurers may have already received state regulators’ approval based on the old definition. Those plans will still have to end coverage by Dec. 31, 2017.