Departments Issue Final Rules on Availability of Short-Term, Limited-Duration Health Plans

Published March 28, 2024

​The Internal Revenue Service, Departments of Health & Human Services (HHS), Labor (DOL) and Treasury have issued final rules aimed at helping consumers distinguish between short-term, limited-duration insurance (STLDI) and fixed indemnity insurance (plans that pay a pre-determined fixed amount for a health-related event, regardless of expenses incurred) from comprehensive coverage. STLDI and fixed indemnity insurance sometimes include benefit limitations. These types of plans are not subject to many of the Affordable Care Act’s (ACA) consumer protections, and, as a result, individuals may unknowingly end up in plans that do not cover essential benefits like prescription drugs, exclude coverage for pre-existing conditions, or impose annual or lifetime dollar limits on services.

The final rules, among other policies, would:

  • Amend the federal definition of STLDI to ensure these “short-term” plans are truly short-term and used to fill temporary gaps in comprehensive coverage. It would also require STLDI and fixed indemnity excepted benefits coverage to make clearer to consumers the differences between these products and comprehensive coverage, including what is covered and how much is covered.
  • Call for limiting the length of the initial STLDI contract period to no more than three months, and the maximum coverage period to no more than four months, taking into account any renewals or extensions. That would reduce the current maximum length of short-term coverage from up to 36 months, including renewals and extensions, according to the Centers for Medicare & Medicaid Services (CMS).
  • Amend the federal definition of STLDI to provide that a renewal or extension includes STLDI sold by the same issuer, or any issuer that is a member of the same controlled group, to the same policyholder within a 12-month period. Prohibit short-term coverage providers from “stacking,” or issuing multiple policies to the same policyholder within a 12-month period.
  • Amend the federal notice standard to help consumers better distinguish between comprehensive coverage and STLDI and get information on their health coverage options. The revised notice standard uses concise and easy-to-understand language that will be meaningful to consumers. The notice must be prominently displayed on the first page of the policy, certificate, or contract of insurance, including for renewals and extensions, and included in any marketing, application, and enrollment (or reenrollment) materials. 
The final rules have the following applicability dates:
  • For policies, certificates, or contracts of STLDI sold or issued on or after September 1, 2024, the maximum term and duration amendments to the definition of STLDI in the final rules apply for coverage periods beginning on or after September 1, 2024. 
  • For policies, certificates, or contracts of STLDI sold or issued before September 1, 2024 (including any subsequent renewals or extensions consistent with applicable law), coverage may continue to have an initial contract term of fewer than 12 months and a maximum duration of up to 36 months (taking into account any renewals or extensions), subject to any limits under applicable state law. 
  • The notice provisions for STLDI apply with respect to coverage periods (including renewals and extensions) beginning on or after September 1, 2024. 
  • The notice provisions for group and individual market fixed indemnity excepted benefits coverage apply to both new and existing coverage with respect to plan years (in the individual market, coverage periods) beginning on or after January 1, 2025.
The final rules are effective June 17, 2024.

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