Changes to Short-Term Health Insurance Plans

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New Federal Rule Imposes Limits on Short-Term Health Insurance

A finalized federal rule announced by the Departments of Treasury, Health and Human Services, and Labor on March 28, 2024, will impose new nationwide duration limits on short-term limited-duration insurance (STLDI) plans. This rule, effective for plans sold or issued on or after September 1, 2024, will limit these plans to three-month terms, with a total duration of no more than four months, including renewals.

Key Changes in the Rule

1. Duration Limits: STLDI plans will now be limited to three-month terms, with a total duration of four months including renewals.
2. Renewals: A renewal includes a new policy issued by the same insurer (or another insurer in the same controlled group) within 12 months of the first policy’s effective date. This rule prevents the practice of “stacking” multiple consecutive policies from the same insurer or an affiliated insurer.
3. Disclosure Requirements: Starting September 1, 2024, STLDI plans must include an updated and comprehensive disclosure notice highlighting major differences between STLDI and ACA-compliant health insurance.

Why These Changes?

The federal government implemented this rule to ensure short-term coverage is used for temporary gaps between comprehensive policies rather than as a long-term solution. Since STLDI plans are excluded from the definition of individual health insurance and not regulated by federal rules like the Affordable Care Act (ACA), the new rule aims to protect consumers from inadvertently choosing less comprehensive coverage.

Impact on Existing STLDI Plans

• Current Policies: There is no change to policies already in effect or those sold and issued before September 1, 2024. These policies will follow existing state rules, which allow for initial terms of up to 364 days and total durations of up to 36 months.
• New Policies: Policies sold or issued on or after September 1, 2024, must comply with the new federal duration limits.

State Regulations

States can impose stricter rules but not more lenient ones regarding STLDI duration. Some states already have regulations limiting or banning short-term plans, and the new federal rules will ensure uniformity starting September 1, 2024.

States with Restrictions on Short-Term Health Plans

Short-term health plans are currently not available in 14 states and DC due to state-specific regulations, including:

• California
• Colorado
• Connecticut
• District of Columbia
• Hawaii
• Maine
• Massachusetts
• Minnesota
• New Hampshire
• New Jersey
• New Mexico
• New York
• Rhode Island
• Vermont
• Washington

Federal and State Coordination

In states where short-term plans are allowed but have different duration limits, the new federal rules will prevail starting September 1, 2024, aligning the regulations across the country.

Enrollment and Coverage Transition

• Special Enrollment Periods: There will be no special enrollment period for individual/family health coverage when a short-term policy terminates. However, the timing of the new rule ensures that consumers can purchase a short-term plan to cover them through the end of 2024 and transition to ACA-compliant coverage starting January 1, 2025.
• Purchasing New Policies: Consumers can still buy new STLDI policies from different insurers after their current policy ends, subject to medical underwriting.

Health Share Memberships as an Alternative

For those seeking alternatives to short-term health insurance, health share memberships can be a viable option. These memberships involve a group of individuals who share healthcare costs among themselves, providing a community-based approach to managing medical expenses. The memberships are month-to-month, which means you can join or cancel at anytime.

Health share plans are not insurance, but they can offer significant cost savings and flexibility. Members contribute a fixed amount monthly, which is then used to cover the medical bills of other members. This model can be especially appealing for those looking for a more affordable and flexible way to manage healthcare costs, while still having a safety net for unexpected medical needs.

Learn more with my Health Share guide to see if joining a health share is right for you.

Conclusion

The changes to short-term health insurance plans aim to provide clarity and protection for consumers, ensuring these plans serve their intended purpose of filling temporary coverage gaps. By understanding these new rules and how they affect both current and future policies, consumers can make more informed decisions about their health insurance needs.

Stay informed and carefully evaluate your healthcare options to ensure you have the coverage you need when you need it.