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This final rule amends the definition of short-term, limited duration insurance, which is excluded from the definition of individual health insurance coverage under the Public Health Service Act. This document also sets forth amendments to the requirements for hospital indemnity or other fixed indemnity insurance to be considered an excepted benefit in the group and individual health insurance markets. This document further sets forth amendments to clarify the tax treatment of certain benefit payments in fixed amounts received under employer-provided accident and health plans. 

Statement of Need:

These changes support the goals of the Affordable Care Act (ACA) by increasing access to affordable and comprehensive coverage, strengthening health insurance markets, and promoting consumer understanding of coverage options.  Consistent with E.O. 14094, and accompanying OIRA guidance on Broadening Public Participation and Community Engagement in the Regulatory Process, and E.O. 12866, the Departments met with interested parties representing consumer advocacy and supplemental benefits industry representatives at the request of those parties.   

Summary of the Legal Basis:

The Department of Health and Human Services regulations are adopted pursuant to the authority contained in sections 2701 through 2763, 2791, 2792, 2794, 2799A-1 through 2799B-9 of the PHS Act (42 U.S.C. 300gg-300gg-63, 300gg-91, 300gg-92, 300gg-94, 300gg-300gg139), as amended.

Alternatives:

In developing the rule, the Departments considered different approaches, including alternative amendments to the definition of short-term, limited-duration insurance, alternative amendments to the consumer notices for short-term, limited-duration insurance and fixed indemnity excepted benefits coverage, and alternative applicability timelines.

Anticipated Costs and Benefits:

These changes are expected to increase consumer understanding of short-term, limited-duration insurance and fixed indemnity excepted benefits coverage as compared to comprehensive health insurance coverage and to strengthen markets for comprehensive health insurance coverage. These changes are also expected to reduce harm caused to consumers who enroll in short-term, limited-duration insurance or fixed indemnity excepted benefits coverage as an alternative to or replacement for comprehensive health insurance coverage. The changes to the definition of short-term, limited-duration insurance are expected to increase enrollment in comprehensive coverage, reduce gross premiums for individuals enrolled in individual health insurance coverage purchased on an Exchange, and decrease Federal expenditures on the premium tax credit. These changes may increase premium costs for individuals who switch from short-term, limited-duration insurance to comprehensive health insurance coverage and are not eligible for government subsidies. They may also increase the number of uninsured individuals if some individuals with short-term, limited-duration insurance do not switch to comprehensive health insurance coverage or purchase short-term, limited-duration insurance from another issuer.

Risks:

Due to a lack of data and information, areas of uncertainty include the forecasting of enrollment changes and the potential impacts to risk pools, premiums, Federal expenditures, and compensation for agents and brokers selling these products.