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 limitation placed on insurance “stacking.” Insurance “stacking” refers to the practice of individuals purchasing multiple short-term plans to extend their health insurance coverage to evade duration limits. The ruling defines disallowed renewals or extensions as short-term medical policies sold by the same issuer, or any issuer that is a member of the same controlled group, to the same policy holder within a 12-month period. With the new ruling, individuals will be restricted from engaging in this practice, which is meant to prevent an individual from having policies designed for the short-term be used for the long-term that do not offer comprehensive coverage for unforeseen health issues.
As a result, individuals will be compelled to seek more sustainable and comprehensive health insurance solutions with guidance from insurance agents and consider alternative longer-term coverage options. This presents an opportunity for insurance agents to provide valuable expertise and guidance, assisting individuals in navigating the complexities of the insurance landscape and finding suitable comprehensive coverage that aligns with their unique needs and 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 were an option for mid-plan year coverage for individuals who were not enrolled in individual comprehensive coverage through the marketplace exchange or through employers. With the limitation on the duration of coverage available, short-term plans may not get an individual to the next open enrollment for other individual ACA compliant health plans, leaving time periods with gaps in coverage and risks for high 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 has far-reaching implications for insured individuals. By understanding the motivations behind the 2018 regulatory update and the rationale for the 2024 ruling, individuals can better comprehend the evolving landscape of health insurance options. The limitation on insurance “stacking” emphasizes the need for individuals to seek comprehensive and sustainable health insurance coverage, underscoring the significance of working with knowledgeable insurance professionals.
Sources:
Department of Health and Human Services – HHS
HHS Final Rule on Short-Term Limited Duration Insurance – HHS Final Rule