The Impacts of the 2024 Short Term Medical Rule
Regulations in the health insurance industry are continually evolving. The Department of Health and Human Services (HHS) announced a new ruling on March 28, 2024 regarding short term medical plans that has significant implications for insured individuals. Understanding the reasons for the initial 2018 update and the purpose behind the new 2024 ruling is important in comprehending the changes that will affect individuals seeking health insurance coverage and agents who offer it.
Background and Regulatory Updates:
In 2018, the HHS made significant changes to short term medical plan regulations, extending the maximum duration from three months to 364 days, with renewals allowed for up to 36 months. The primary objective was to provide individuals with more affordable health insurance options, albeit with certain limitations, such as exclusions for pre-existing conditions. However, concerns emerged regarding the adequacy of coverage and the potential disadvantages faced by individuals with pre-existing conditions.
The newly introduced 2024 ruling aims to address these concerns by reverting the allowed duration of short-term medical plans back to three months, with only one month allowance for renewal or extension to total four months of coverage maximum. This change is intended to guide individuals towards comprehensive health insurance coverage that includes essential health benefits and ensures protection for those with pre-existing conditions.
Impact of Limited Insurance “Stacking”:
One significant aspect of the 2024 ruling is the new restriction on insurance “stacking.” Insurance stacking occurs when individuals buy multiple short-term plans to extend their coverage and avoid duration limits. The ruling prohibits issuers from renewing or extending short-term medical policies for the same policyholder within a 12-month period. This includes policies sold by the same issuer or any issuer within the same controlled group. Starting September 1, 2024, individuals must follow these limits and cannot use short-term plans as long-term coverage. This rule helps ensure consumers do not rely on limited coverage for ongoing or unforeseen health needs.
As a result, individuals must seek more sustainable and comprehensive health insurance with help from knowledgeable insurance agents. This shift creates an opportunity for agents to offer expert guidance and support clients in finding long-term, suitable coverage options. Agents can help individuals navigate insurance complexities and choose plans that meet their unique needs and personal circumstances.
Impact of Purchasing Short-Term Coverage through Associations or Trusts:
The Departments recognize that many short-term medical and limited duration medical plans are sold through trusts or associations. Some issuers provide short-term coverage in these groups in states with less state regulation to avoid more rigorous regulation in the state a consumer actually resides. However, the new ruling states that for the purposes of federal law, coverage sold to individuals through a group trust or association is subject to the consumer protections and requirements for comprehensive individual health insurance coverage vs group health coverage. The exception here would be group health plans with comprehensive coverage, such as those offered by an employer group.
Understand and Combat the Negative Impacts of this Ruling:
There are two main areas of concern to address with individuals who have previously held short-term medical policies.
Affordability: While short-term plans were previously sought for their affordability, the 2024 ruling may lead to increased premiums for individuals seeking alternative insurance options, as short-term plans offered a more budget-friendly choice.
Availability: Short-term plans offered coverage for individuals not enrolled in comprehensive marketplace or employer-based health insurance.
With new duration limits, these plans may no longer bridge gaps until the next open enrollment for ACA-compliant coverage.
As a result, individuals may face periods without insurance and become exposed to high out-of-pocket healthcare costs.
There are other alternative ACA compliant healthcare options to offer your clients looking for more affordable comprehensive coverage with enrollment outside of the marketplace annual open enrollment without a qualifying life event. For a review of options, reach out to Enrollment First, Inc to speak with a representative.
In Conclusion:
The Department of Health and Human Services’ new ruling on short-term medical plans takes effect on September 1, 2024. This update brings significant implications for insured individuals navigating today’s health insurance landscape.
By understanding the motivations behind the 2018 update and the 2024 rule, individuals can make more informed insurance decisions. The new restriction on insurance “stacking” highlights the importance of securing sustainable, long-term health coverage.
Therefore, working with knowledgeable insurance professionals becomes essential for finding the right plan and ensuring adequate protection.
Sources:
Department of Health and Human Services – HHS
HHS Final Rule on Short-Term Limited Duration Insurance – HHS Final Rule