Short Term Limited Duration Insurance
On October 12, 2017, President Donald Trump issued an Executive Order that signals a sharp departure from the Obama administration’s policy relating to short term limited-duration insurance (STLDI) and may have significant impact to issuers and consumers of short-term medical plans. Frost Brown Todd’s prior legal updates on the development of the regulations referenced in the Executive Order can be found here: October 31, 2016 and July 6, 2016.
Section 1(b)(ii) of the Order criticized the 2016 regulations promulged by the U.S. Departments of Treasury, Labor, and Health and Human Services, which narrowed the Affordable Care Act exemptions for STLDI plans. Prior to the promulgation of these regulations, STLDI plans which provided coverage for less than 12 months were exempt from ACA requirements. Plans issued on or after January 1, 2017, with limited exceptions, only qualify for the exemption if they provide coverage for less than three months. As the Executive Order indicates, the regulations “restrict access to this market” by curtailing the availability of STDLI coverage.
Consumers who miss open enrollment or are in transition between employment positions must wait until the next open enrollment period before obtaining coverage through an exchange plan, unless a special enrollment life event occurs. This creates gaps in health care coverage that can leave consumers exposed to financial ruin should they incur medical expenses during their coverage gap. STDLI helps fill those gaps, but by truncating the ACA exemption to three months, the 2016 regulations left those with longer coverage gaps exposed to substantial risk, including individuals who did not qualify or were otherwise ineligible for ACA coverage.
Section 3 of the Executive Order announces the Trump Administration’s policy objective of expanding the availability of STLDI, and orders the Secretaries of the Departments of Treasury, Labor, and Health and Human Services to, within 60 days of the Order, “consider proposing regulations or revising guidance, consistent with law, to expand the availability of STLDI.” Section 3 also instructs the Secretaries to “consider allowing such insurance to cover longer periods and be renewed by the consumer.” By expanding the duration for exempt STLDI plans, the Trump Administration would help provide adequate coverage for consumers with longer health care coverage gaps.
Should the Secretaries implement the regulatory changes suggested in the Order, insurers will once again be able to issue STDLI plans with longer durations, enabling consumers to obtain adequate coverage to fill gaps that may occur in the event that they lose coverage between open enrollment periods.
The 2016 regulations that shortened STLDI coverage to three months also limited the incidental medical coverage offered under travel insurance plans to six months. This greatly impacts travelers with trips lasting longer than six months who depend upon the medical coverage in their travel policies, including students traveling to and from the United States on extended study abroad programs. Although the Executive Order does not explicitly discuss travel insurance, the impending regulatory revisions may also address this limitation in the availability of travel insurance as part of the President’s overarching policy goal of promoting greater consumer choice in health insurance coverage.
Look for further updates on the specific action taken by the Secretaries in response to the President’s Order. If you have questions regarding the regulations at issue or how the changes contemplated by the Executive Order may affect your business, please do not hesitate to contact Greg Mitchell, Donald Morgan, or Ellis Wilder in Frost Brown Todd’s Insurance Industry Group.