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Final Regulations Expand Availability of Individual Insurance Not Meeting ACA Requirements

The U.S. Departments of the Treasury, Labor, and Health and Human Services have jointly issued final rules modifying the definition of short-term, limited-duration insurance (STLDI). 

STLDI provides health coverage that is intended to be transitional in nature. It is not regarded as individual health insurance or minimum essential coverage and is exempt from certain Affordable Care Act (ACA) requirements that apply to plans in the individual health insurance market. For example, STLDI may include limits on coverage for pre-existing conditions, preventive care, and annual and lifetime medical expenses in a manner prohibited by the ACA's market reform rules. In addition, an STLDI policy is not required to cover expenses that the ACA identifies as essential health benefits, such as hospitalization, prescription drugs, or mental health benefits. Coverage under an STLDI policy is not guaranteed to be renewable. 

Making certain modifications to the proposed regulations issued earlier this year, the new final regulations provide that:

  • a policy for STLDI must last for an initial period that is less than one year;

  • STLDI coverage may be renewed to continue for no more than 36 months; and

  • the STLDI policy must include a prescribed notice addressing limitations that may apply to the coverage. The notice will change for policies issued in 2019, when the individual mandate assessment ceases to apply. 

The new rules are scheduled to take effect October 2, 2018. This short lead time may require insurers to take swift action to include the new notice and take other appropriate measures.

There are some obstacles, however, that may affect the implementation of new STLDI policies. First, Senate Democrats are making a push to override the new regulations under the Congressional Review Act. Even if they are able to muster enough votes in the Senate, they are not likely to overturn the regulations in the House. Second, some of the comments to the proposed regulations question the authority of the three departments to issue these STLDI regulations, perhaps laying the groundwork for a legal challenge (just as certain states have challenged the recent issuance of final regulations expanding the scope of association health plans). Perhaps most significantly, states retain the authority to regulate insurance, and certain states may choose to delay approval of new STLDI policies while they consider whether to impose more stringent rules than the new federal regulations require.

If and when the new rules are implemented, their effect on coverage, the cost of coverage, and enrollment in the individual and group health insurance markets will be closely examined.

Copyright © by Ballard Spahr LLP


About this Author

Edward I. Leeds, Philadelphia attorney, Ballard Spahr Law firm, Employee Benefits and Executive Compensationattorney

Edward I. Leeds concentrates on issues relating to the design, administration, and taxation of health and other welfare benefit plans. His practice has evolved with the laws and market forces that shape those plans. Mr. Leeds advises clients about compliance with the Affordable Care Act, HIPAA, HITECH, COBRA, cafeteria plan rules, and other legal requirements. He prepares clients for audits of their privacy and security measures under HIPAA and advises them about the rules governing wellness initiatives.

Mr. Leeds represents employers in the negotiation and drafting of contracts...

 Jean C. Hemphill, LAWYER at Ballard Spahr, Philadelphia, Health Care, Employee Benefits and Executive Compensation, Exempt Organizations, Health Care Reform

Jean C. Hemphill is the Co-Leader of Ballard Spahr's Health Care Group. Ms. Hemphill has a general corporate and regulatory practice, specializing in health care, employee benefits, and nonprofit law. She represents academic medical centers, medical schools, health systems, physician practice groups, clinical laboratories, social service agencies, pension and welfare plans, employers, business groups, and other entities. She is also active in higher education matters.

Before joining Ballard Spahr in 1997, Ms. Hemphill was Vice President and General Counsel of the Board of Pensions of the Presbyterian Church (U.S.A.), the entity administering the pension, medical, disability, and death benefits plans for the ministers and lay employees of the Presbyterian Church. She continues to serve as General Counsel for the Board and as legal counsel to numerous other denominational benefits programs.

Ms. Hemphill is a frequent lecturer on health, employee benefits, and nonprofit law subjects, including most recently the Patient Protection and Affordable Care Act,Medicare Part D compliance, HIPAA privacy and security matters, fraud and abuse, compliance, fiduciary duties of directors and officers, and other governance issues for tax-exempt organizations.