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Short-Term, Limited Duration Insurance (October 2018)

An Alternative to Affordable Care Act Health Plans?

By Linda J. Sheppard, J.D. | October 03, 2018

Short-Term, Limited Duration Insurance (October 2018)

READ IT HERE — Short-Term, Limited Duration Insurance

On October 12, 2017, President Donald Trump issued an Executive Order promoting two types of health insurance coverage as alternatives to the health insurance plans available to individuals and small businesses under the Affordable Care Act (ACA) — association health plans, (http://bit.ly/KHI-1810) and short-term, limited duration insurance (STLDI). The order directed the secretaries of the Treasury, Labor and Health and Human Services (the “Departments”) to consider expanding the availability of STLDI by allowing it to cover longer periods and be available for renewal by consumers. The president noted that since STLDI is not subject to the ACA’s mandates and regulations, it can be an affordable alternative to the health plans sold through the ACA marketplaces for individuals who do not obtain coverage through their employer. 

In response to the president’s order, the Departments issued a proposed rule on February 21, 2018, stating the intent to “lengthen the maximum period of short-term limited duration insurance, which will provide more affordable consumer choice for health coverage.” During the public comment period for the proposed rule, which ended on April 23, the Departments received more than 12,000 comments. The Final Rule, which lengthened the maximum period to three years, was released on August 1. It became effective October 2, 2018. 

Key points from the brief include:

  • Short-term, limited duration insurance (STLDI), a type of health insurance originally designed to allow consumers to fill temporary gaps in coverage, may now be an alternative to plans available under the ACA.
  • The Final Rule released by the Departments of the Treasury, Labor and Health and Human Services now allows STLDI plans to have a duration of up to 36 months, including renewals.
  • STLDI may be an attractive alternative to young, healthy consumers who require little or no ongoing health care or prescription drugs, but may increase premiums for individuals who want or need ACA-compliant coverage and could cause insurers to leave the ACA-compliant market. 
  • Newly defined STLDI plans could be available for sale to consumers in late 2018 or early 2019.

The Kansas Health Institute supports effective policymaking through nonpartisan research, education and engagement. KHI believes evidence-based information, objective analysis and civil dialogue enable policy leaders to be champions for a healthier Kansas. Established in 1995 with a multiyear grant from the Kansas Health Foundation, KHI is a nonprofit, nonpartisan educational organization based in Topeka.