Comprehending the Non-Comprehensive: Proposed Rules Tackle Non-Traditional Coverage

The Departments of Labor, Health and Human Services, and the Treasury have published a set of proposed rules that impose new limits on two types of benefits: short-term limited-duration insurance (STLDI) and fixed indemnity coverage.

STLDI

STLDI is a form of temporary health insurance originally intended to fill gaps in coverage. It does not offer comprehensive health coverage and is not subject to the requirements and protections of the Affordable Care Act (ACA). The rules governing the duration of STLDI have been the subject of an ongoing clash between Republican and Democrat administrations, with the period originally established at 12 months, then shortened during the Obama Administration to three months, then lengthened during the Trump Administration to 12 months with an opportunity to renew coverage twice (for a maximum period of 36 months).

The new proposal would shorten the period again to three months, allowing an extension up to a maximum total period of four months with a particular STLDI carrier. An individual may not re-enroll for STLDI coverage with that carrier for another 12 months.

The new limits on duration aim in part to differentiate STLDI from more comprehensive individual coverage that is subject to federal standards under the Affordable Care Act, so that individuals will have a better understanding of the coverage options available to them. Toward that end, the proposed regulations also modify the notice that must be included in materials describing STLDI, further distinguishing it from comprehensive individual coverage.

Fixed Indemnity Coverage

The proposed regulations revise the rules governing fixed indemnity coverage as an excepted benefit that is exempt from many Affordable Care Act provisions and other requirements that apply to health plans. Under the proposed rules, fixed indemnity coverage will be an excepted benefit only if it pays a fixed amount on a per-time period basis, for example, $100 per day of hospitalization or per day that an individual experiences an illness, such as cancer. The amount may not vary based on factors such as the services provided or the amount of medical expenses.

The proposed rules aim to establish that fixed indemnity plans will be excepted benefits only if they serve as a form of income replacement and not as a means of reimbursement for medical expenses. To further this distinction, the proposed regulations also:

• Require that the first page of any marketing, application, and enrollment materials include a prominent notice with specified language that clarifies that the fixed indemnity coverage is not comprehensive health insurance.
• Prohibit the fixed indemnity coverage from coordinating benefit payments with benefits under a group health plan.

These changes more firmly establish fixed indemnity insurance as a form of income replacement, making a clearer distinction from comprehensive health coverage in the group and individual marketplaces.

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