Join our guest blogger, Stephanie Berry, as she answers frequently asked questions about short-term limited duration health insurance plans (STLD). Stephanie is a Senior Legislative and Policy Analyst based in Rancho Cordova, California.
On October 2, the U.S. Department of Health and Human Services (HHS) put new rules into effect lengthening the maximum duration for short-term limited duration health insurance (STLD). Prior to the enactment of the Affordable Care Act (ACA), STLD plans were prevalent in the individual market for people who experienced temporary gaps in health coverage, such as losing or changing a job. Unlike “limited benefit” policies, such as cancer-only or hospital-only policies, STLD plans were considered akin to comprehensive medical plans, only differing in their limited term, previously 90 or less days. The new HHS regulations increase the duration of STLD plans, potentially making them more appealing to certain demographics, particularly younger, healthier consumers.
Q: How long can these new STLD plans last?
A: The new rules state that a short-term plan can last up to a year (364 days), and consumers will be able to renew that plan for a maximum of two additional years (up to 36 months). This is a change from the federal rules, which previously limited STLD plans to three months. Individual health plans have been guaranteed renewable since 1996, whereas STLD plans previously terminated at the end of the contract, meaning that a change in health status could cause policyholders to be dropped from coverage.
Q: Do STLD plans have to follow the same ACA rules regarding medical underwriting, pre-existing condition exclusions, etc.?
A: No. The ACA exempted STLD plans from market rules. As a result, the following are permissible under STLD plans:
- Medical underwriting: Applicants can be excluded or charged higher premiums based on health status, gender, or age
- Excluding coverage for pre-existing conditions
- No coverage for essential health benefits that ACA-compliant plans must cover, such as pregnancy, prescription drugs, or mental health care
- Lifetime or annual limits
- No limit to out-of-pocket expenses
Q: Can dental be offered as an STLD product?
A: STLD products are meant to compete with major medical plans, and, as a result, there is not a clear role for stand-alone dental carriers in the STLD space.
Q: How do STLD plans differ from Association Health Plans?
A: Think of Association Health Plans as a way for members of associations to band together to purchase large group health insurance. As a result, an AHP could choose an STLD plan as the health insurance plan it offers to its members.
Q: What role do states play in regulating STLD products?
A: States can take action to comply with the new STLD regulations or implement their own restrictions and guidelines, many of which are already enshrined in state law. Brokers should reach out to state departments to understand any additional state requirements. Here are a few examples on how states are reacting to the new STLD regulations:
- Four states currently prohibit STLD plans, including Massachusetts, New Jersey, New York and California (SB 910 in California was signed by the governor in September). Relatedly, Hawaii enacted a law this year (HB 1520) that bars residents from enrolling in STLD policies if they are otherwise eligible to purchase coverage from the federal health insurance marketplace during an open or special enrollment period. It also limits the duration of an STLD policy to less than 91 days.
- States can – and have – adopted shorter maximum durations of an STLD policy. For instance, the South Carolina Department of Insurance has restricted STLD policies to 11 months or less, and limits renewals to a total of 33 months or less coverage. (This is intended to distinguish STLD policies from ACA-compliant policies.) Michigan, by contrast, limits STLD policies to six months or less out of any 365-day period.
- States can impose requirements on disclosure and marketing. The Maine Bureau of Insurance issued a bulletin stating that when offering an STLD policy, a carrier or broker must provide clear language that the policy does not offer protections from pre-existing condition exclusions or guaranteed renewability. Both Nebraska and Iowa require a “free-look” period, whereby the newly-insured can cancel the policy within a set timeframe.
- States can require STLD products to cover essential health benefits (EHBs) or other ACA-market protections. The Connecticut Insurance Department issued a bulletin to clarify that STLD plans must cover EHBs, and that any renewable STLD plan or any STLD that has a duration of six months or longer is prohibited from excluding coverage for pre-existing conditions. Maine law requires STLD plans to cover preventive health services and bars dollar limits on coverage.
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