After months of waiting and speculation, we finally have received a final rule from the Departments of Health and Human Services, Labor, and the Treasury on Fixed Indemnity and Short-Term, Limited-Duration insurance policies.
For Fixed Indemnity Excepted Benefit plans, the final rule:
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Revises the existing consumer notice in the individual market; and
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Implements a consumer notice in the group market.
The notice must be displayed in marketing, application, and enrollment (and reenrollment) materials in both individual and group markets, and the policy, certificate, or contract of insurance in the individual market. The notice can be found on page 236 of the finalized rule, and applies to both new and existing coverage beginning January 1, 2025.
The proposed rules of July 2023 had included significant amendments to tax treatment of fixed indemnity benefits, payment standards, and a non-coordination requirement, but these amendments were not finalized. The fact sheet does note the intention to revisit these proposed changes after additional study of issues raised in comments.
For Short-Term, Limited-Duration plans, the final rule:
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Revises the definition of STLDI to limit the length of the initial contract term to three months and the maximum coverage duration to no more than four months, including any renewals or extensions 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;
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Clarifies coverage sold to individuals through a group trust or association, other than in connection with a group health plan, is not group coverage, and must meet the federal definition of STLDI or it is subject to the federal consumer protections and requirements for comprehensive individual health insurance coverage; and
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Amends the consumer notice to be displayed in the policy, certificate, or contract of insurance, and marketing, application, and enrollment (and reenrollment) materials.
The final term and duration limits apply to STLDI plans sold or issued on or after September 1, 2024. Plans sold or issued before September 1, 2024, including renewals or extensions, may continue to provide coverage for an initial term of less than 12 months with a maximum duration of 36 months. The STLDI notice can be found on page 217 of the finalized rule, and applies to coverage beginning September, 2024, including renewals and extensions.