Health Care Reform: Final Rule Shortens Allowable Duration of Short-Term Insurance, Adds Issuer Notice Requirement
Rule Generally Applicable Beginning January 1, 2017
The U.S. Departments of Treasury, Labor, and Health and Human Services recently published a final rule that restricts the allowable duration of short-term, limited-duration insurance to less than three months and requires issuers to prominently display a new notice in the contract and application materials provided in connection with such insurance. The final rule is applicable to policy years beginning on or after January 1, 2017.
Background
Under the Affordable Care Act (ACA), short-term, limited-duration insurance is exempted from certain market reforms, including the annual dollar limit prohibition and the pre-existing condition exclusion. In exchange, the ACA limits the allowable duration of short-term, limited-duration insurance to less than twelve months after the original effective date of the contract, and declines to qualify such insurance as minimum essential coverage necessary for an individual to satisfy the individual mandate.
New Coverage Period Restriction
The new final rule revises the definition of short-term, limited-duration insurance so that the coverage must be less than three months in duration after the original effective date of the contract, including any period for which the policy may be renewed. While the revised definition applies for policy years beginning on or after January 1, 2017, the Department of Health and Human Services will not take enforcement action against an issuer with respect to the issuer’s sale of a short-term, limited-duration insurance product before April 1, 2017 on the ground that the coverage period is three months or more, provided that the coverage ends on or before December 31, 2017 and otherwise complies with the definition of short-term, limited-duration insurance in effect under federal regulations. In addition, states may also elect not to take enforcement actions against issuers with respect to such coverage sold before April 1, 2017.
New Notice Requirement for Issuers
Effective for policy years beginning on or after January 1, 2017, issuers of short-term, limited-duration insurance must prominently display the following notice in the contract and in any application materials provided in connection with enrollment in such coverage in at least 14 point type:
“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.”
Click here to read the final rule in its entirety.
