Short-Term, Limited-Duration Insurance

Post Date: 2/26/18
Last Updated: 2/26/18


Cross References
- REG-133491-17, February 21, 2018

The Secretaries of the Treasury, Labor, and Health and Human Services have issued new proposed regulations that amend the definition of short-term, limited-duration insurance for purposes of its exclusion from the definition of individual health insurance coverage.

Under President Trump's Executive Order dated October 12, 2017, within 60 days, the Secretaries were to consider proposing regulations or revising guidance to expand the availability of short-term, limited-duration insurance.

Under the Affordable Care Act (ACA), non-exempt individuals must maintain minimum essential health insurance coverage or pay a penalty tax (the individual shared responsibility payment). Short-term, limited-duration insurance is a type of health insurance coverage that was designed to fill temporary gaps in coverage that may occur when an individual is transitioning from one plan or coverage to another plan or coverage.

Prior guidance defined short-term, limited-duration insurance as health insurance coverage provided pursuant to a contract with an issuer that has an expiration date specified in the contract that is less than 12 months after the original effective date of the contract. After ACA, guidance was proposed that shortened the length to less than three months. This guidance also included a requirement that the following notice be prominently displayed in the contract and in any application materials provided in connection with enrollment in short-term, limited-duration insurance:
"This is not qualifying health coverage (minimum essential coverage) that satisfies the health coverage requirement of the Affordable Care Act. If you don't have minimum essential coverage, you may owe an additional payment with your taxes."

The intent of this guidance was to limit the number of consumers relying on short-term, limited-duration insurance as their primary form of coverage and improve the individual market single risk pools. However, critics expressed concerns about restricting the use of short-term, limited-duration insurance because it provides an additional, often much more affordable coverage option than an insurance policy that complies with all of the requirements of the ACA. Individuals who do not qualify for premium tax credits and need temporary coverage, or who cannot afford COBRA continuation coverage, or who missed an opportunity to sign up during the open enrollment periods, might need to rely on short-term, limited-duration insurance coverage for three months or longer.

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