On Friday, October 28, the Departments of Health and Human Services, Labor and Treasury finalized a part of a regulation concerning short-term medical insurance plans, travel insurance and supplemental coverage classified as an excepted benefit. The original proposed rule addressed expatriate coverage and fixed indemnity plans as well and also contemplated placing additional requirements on specified disease coverage, but the Obama Administration has delayed action on finalizing those requirements at this time.
The new rule covers short-term individual health insurance policies and makes significant changes to their construct. Short-term health insurance policies are not excepted benefits, but they are also specifically not minimum essential coverage; therefore, being covered under one does not meet an individual’s responsibility to maintain minimum essential coverage under the ACA. The new rule specifies that to be considered short-term coverage, a policy must be for a period less than three months. Previously these policies were available in most states for up to 12 months in duration. The three-month time period is designed to align with the time period that individuals can be without coverage and still avoid the individual mandate penalty. The new requirements also specify that every policy contract and all application materials and enrollment materials must prominently include the following warning:
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.
The new rule also prohibits contract extensions “that may be elected with or without the issuer’s consent” so that short-term coverage cannot be indefinitely renewed. However, there is nothing stopping someone who has previously been covered under one short-term policy from simply applying for another, even from the same carrier. Short-term policies must simply not guarantee renewability.
The new rule also makes some clarifications about what travel health insurance policies and supplemental health insurance policies (GAP plans) must do to maintain status as “excepted benefits” not subject to all ACA requirements. “Similar supplemental coverage” that supplements and fills group health coverage gaps is traditionally considered to be excepted benefit coverage. The final rule clarifies that to maintain that status the supplemental coverage must either:
- cover benefits that are not covered by the primary coverage and are not essential health benefits in the state where the coverage (including expatriate coverage) is issued;
- cover cost-sharing for primary benefits; or
- provide both supplemental benefits and cover cost-sharing.
Similar supplemental group coverage does not include coverage that becomes secondary or supplemental only under a coordination of benefit provision.
The final rule also defines what kind of travel insurance may have excepted benefit status. Excepted travel insurance (meaning not subject to the ACA and HIPAA and related laws and regulations) is now insurance for “the personal risks of planned travel, such as trip interruption or cancellation, loss of baggage, damages to accommodations or rental vehicles, and sickness, accident, disability, or death during travel, as long as health benefits are not offered on a standalone basis and are incidental to other coverage.” Comprehensive medical protection for travelers with trips lasting six months or longer, such as expatriates or deployed military personnel is not considered travel insurance for the purposes of excepted benefits.
Finally the new rule makes a technical correction to a reference in the final regulations relating to the prohibition on lifetime and annual dollar limits.
All of the new requirements will take effect on the first day of the first policy year beginning on or after January 1, 2017. However, in recognition of preexisting and now superseded state laws that may substantially differ with regard to short-term policies, the Administration will not enforce the requirement that short-term coverage be less than three months for products sold before April 1, 2017, as long as the coverage ends on or before December 31, 2017. The rule also allows states to delay enforcement during this time period.
Final rules addressing expatriate policies and fixed indemnity coverage are still pending; the Administration will eventually issue a final regulation covering these topics. The Departments announced that they are still taking into account comments received on these issues, and NAHU is continuing to work with the Administration to fully explain the views of NAHU members on these two important topics.
Furthermore, the issuance of a final rule on any or all of these matters does not preclude further legislative or legal action that may change the scope of these requirements at a later date. Court action to challenge the Administration’s authority over expected benefit regulation, such as Central United Life v. Burwell, is already pending and more suits could follow. It is also conceivable, although not likely, that Congress could enact statutory changes that could modify these requirements or take action to block this rule. None of those actions would be supported or signed by President Obama, but it is possible an administration in the future may view these matters differently.