This has been a complex regulatory season for short-term limited duration insurance and hospital or other fixed indemnity coverage. Let’s take a look at the timeline of key events and what’s next for the U.S. Department of the Treasury, Department of Labor, and the Department of Health and Human Services (Tri-Agencies) rule.
July 2023
The Tri-Agencies published proposed rule changes to short-term limited duration insurance, hospital or other fixed indemnity coverage, specific disease insurance, and taxation of fixed indemnity benefits.
April 2024
The Tri-Agencies published final rules (89 Fed. Reg. 23338 (April 3, 2024)) amending regulations regarding requirements for short-term limited duration insurance and hospital or other fixed indemnity coverage.
Requirements for short-term limited duration insurance:
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length of the initial contract term limited to three months and maximum coverage duration limited 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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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 short-term limited duration insurance or it is subject to the federal consumer protections and requirements for comprehensive individual health insurance coverage; and
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must display amended consumer notice in the policy, certificate or contract of insurance, marketing, application, and enrollment (and reenrollment) materials.
Requirements for hospital or other fixed indemnity insurance:
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must display amended consumer notice in the policy, certificate or contract of insurance, marketing, application, and enrollment (including reenrollment) materials in the individual market; and
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must display new consumer notice in marketing, application, and enrollment (including reenrollment) materials in the group market.
May 2024
Manhattan Life Insurance and Annuity Company filed a lawsuit in the United States District Court of the Eastern District of Texas challenging the hospital or other fixed indemnity coverage notice requirement of the Tri-Agency final rule.
September 2024
Final term and duration limits and notice requirements for short-term limited duration insurance are effective.
December 2024
The United States District Court of the Eastern District of Texas vacated the hospital or other fixed indemnity coverage notice requirement of the Tri-Agency final rule.
April 2024 – January 2025
Many states implemented or proposed regulations, issued bulletins, or provided SERFF notices related to the Tri-Agency final rule.
States implementing regulations:
Illinois passed HB2499, which requires that on and after January 1, 2025, no company shall issue, deliver, amend, or renew short-term limited-duration insurance to any natural or legal person that is a resident or domiciled in the state. Short-term limited duration insurance is defined as having an expiration date fewer than 365 days after the effective date.
Indiana proposed SB 165, which requires an insurer that issues a short term insurance plan to cover certain medical services and amends current provisions exempting short term insurance plans from accident and sickness insurance policy requirements to provide for a term of not more than 6 months (current law provides for a term of 364 days).
January 2025
The hospital or other fixed indemnity coverage notice requirement of the Tri-Agency final rule, which was vacated in the previous month by the Eastern District of Texas, is effective.
H.R.379 was introduced in the United States House of Representatives, providing that the Tri-Agency final rule shall have no force or effect if passed.
What’s Next?
States that implemented or proposed regulations, issued bulletins, or provided SERFF notices have yet to provide formal guidance following the United States District Court of the Eastern District of Texas vacation of the hospital or other fixed indemnity notice requirement of the Tri-Agency final rule.
It is possible that an appeal could be brought against the United States District Court of the Eastern District of Texas vacation of the hospital or other fixed indemnity notice requirement of the Tri-Agency final rule. Alternatively, if H.R.379 is passed, the Tri-Agency final rule shall have no force or effect.
Because the effective dates of the Tri-Agency final rule have already passed, and changes have already been implemented, Carriers are now navigating this evolving regulatory landscape to determine how to best proceed.
In addition, 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 final rule fact sheet did note the intention of the Tri-Agencies to revisit these proposed changes after additional study of issues raised in comments.