Federal Agencies Propose to Allow Short-Term, Limited-Duration Insurance for Longer Periods.
Current Requirements Continue to Apply Until Proposal is Finalized
Federal agencies recently proposed to amend the definition of short-term, limited-duration insurance so that it may offer a maximum coverage period of less than 12 months after the original effective date of the contract, rather than the current maximum period of less than 3 months. The proposal would also revise the required issuer notice that must be displayed in the contract and any application materials.
Proposal Applicability Date
While the current definition applies to policy years beginning on or after January 1, 2017, a non-enforcement policy applies to policies sold before April 1, 2017, and that end on or before December 31, 2017. The current definition and non-enforcement policy would continue to apply unless and until the proposal is finalized. If finalized, the proposal would apply to insurance policies sold on or after the 60th day following publication of the final rule. Policies sold on or after this date would have to meet the definition of short-term, limited-duration insurance in the final rule in order to be considered such insurance.
Under the Affordable Care Act, short-term, limited-duration insurance is exempt from certain market reforms. The allowable duration of such insurance is currently limited to less than three months after the original effective date of the contract. In addition, this insurance is not considered minimum essential coverage, which is necessary for an individual to satisfy the individual mandate unless an exemption applies.